In stromal cells of endometriosis, marked levels of aromatase P450 (P450arom) mRNA and activity are present and can be vigorously stimulated by (Bu)2cAMP or PGE2 to give rise to physiologically significant estrogen biosynthesis. Since eutopic endometrial tissue or stromal cells lack P450arom expression, we studied the molecular basis for differential P450arom expression in endometriosis and eutopic endometrium. First, we demonstrated by rapid amplification of cDNA 5'-ends that P450arom expression in pelvic endometriotic lesions is regulated almost exclusively via the alternative promoter II. Then, luciferase reporter plasmids containing deletion mutations of the 5'-flanking region of promoter II were transfected into endometriotic stromal cells. We identified two critical regulatory regions for cAMP induction of promoter II activity: 1) a-214/-100 bp proximal region responsible for a 3.7-fold induction, and 2) a -517/ -214 distal region responsible for potentiation of cAMP response up to 13-fold. In the -214/-100 region, we studied eutopic endometrial and endometriotic nuclear protein binding to a nuclear receptor half-site (NRHS, AGGTCA) and an imperfect cAMP response element (TGCACGTCA). Using electrophoretic mobility shift assay, cAMP response element-binding activity in nuclear proteins from both endometriotic and eutopic endometrial cells gave rise to formation of identical DNA-protein complexes. The NRHS probe, on the other hand, formed a distinct complex with nuclear proteins from endometriotic cells, which migrated at a much faster rate compared with the complex formed with nuclear proteins from eutopic endometrial cells. Employing recombinant proteins and antibodies against steroidogenic factor-1 (SF-1) and chicken ovalbumin upstream promoter transcription factor (COUP-TF), we demonstrated that COUP-TF but not SF-1 bound to NRHS in eutopic endometrial cells, whereas SF-1 was the primary NRHS-binding protein in endometriotic cells. In fact, COUP-TF transcripts were present in both eutopic endometrial (n = 12) and endometriotic tissues (n = 8), whereas SF-1 transcripts were detected in all endometriotic tissues (n = 12), but in only 3 of 15 eutopic endometrial tissues. Moreover, we demonstrated a dose-dependent direct competition between SF-1 and COUP-TF for occupancy of the NRHS, to which SF-1 bound with a higher affinity. Finally, overexpression of SF-1 in eutopic endometrial and endometriotic cells strikingly potentiated baseline and cAMP-induced activities of -517 promoter II construct, whereas overexpression of COUP-TF almost completely abolished these activities. In conclusion, COUP-TF might be one of the factors responsible for the inhibition of P450arom expression in eutopic endometrial stromal cells, which lack SF-1 expression in the majority (80%) of the samples; in contrast, aberrant SF-1 expression in endometriotic stromal cells can override this inhibition by competing for the same DNA-binding site, which is likely to account for high levels of baseline and cAMP-induced aromatase activity.