Expression of the Saccharomyces cerevisiae arginase (CAR1) gene is regulated by induction and nitrogen catabolite repression (NCR). Arginine was demonstrated to be the native inducer. CAR1 sensitivity to NCR has long been accepted to be accomplished through a negative control mechanism, and cis-acting sites for it have been hypothesized. In search of this negatively acting site, we discovered that CAR1 sensitivity to NCR derives from regulated inducer (arginine) exclusion. The route of catabolic entry of arginine into the cell, the general amino acid permease (GAP1), is sensitive to NCR. However, CAR1 expression in the presence of sufficient intracellular arginine is NCR insensitive.