Collagenase production by synovial fibroblast-like cells (synoviocytes) plays a major role in cartilage and bone destruction in rheumatoid arthritis. Interleukin-1 (IL-1) increases collagenase secretion by elevating the steady state levels of collagenase mRNA in cultured rheumatoid synoviocytes, while all-trans-retinoic acid (RA) has the opposite effect. We have studied the regulation of collagenase gene transcription by IL-1 and RA in synoviocytes by transient transfection of plasmid constructs containing deletion mutants of the 5'-flanking region of the collagenase gene or the isolated phorbol ester-responsive element ligated to a chloramphenicol acetyltransferase reporter gene. We show that the phorbol ester-responsive element of the collagenase gene mediates both positive and negative regulatory effects, respectively, of IL-1 and RA on transcription. In addition, we show that IL-1 and 12-O-tetradecanoyl-phorbol-13-acetate transiently induce c-jun and c-fos expression and that retinoic acid inhibits IL-1 and 12-O-tetradecanoyl-phorbol-13-acetate induction of c-fos, but not c-jun. These results suggest that RA inhibits collagenase transcription at least in part through inhibition of c-fos.