We have produced transgenic mice expressing a lacZ reporter gene under the control of a fragment of a Steel factor (SLF). The function of this gene is essential for the development of hematopoietic cells, germ cells, melanocytes and pacemaker cells of the intestine. The expression of the transgene, containing 2 kb DNA 5' regulatory sequence, was restricted to neural and skin tissues in appropriate spatial and temporal pattern compared with endogenous SLF mRNA expression. This indicates that the regulatory elements necessary for the neural and skin specific expression are present in this 2 kb DNA sequence, although strong position-dependence of transgene expression was observed. As we could not detect transgene expression in hematopoietic tissues and germ cells after extending 10 kb upstream, elements important for these organs must reside in other regions. Our results indicate that neural crest derived enteric ganglion cells provide SLF to the neighboring pace maker cells expressing c-kit, the receptor for SLF. Cells expressing the transgene in the intestine are ganglion cells derived from neural crest since homozygosity for the lethal spotting (Is) mutation results in loss of such ganglion cells in transgenic mice. We have also shown that the dermal papillae of the hair follicle expresses the transgene, suggesting its roles to support the c-kit dependent growth and development of melanocytes in the hair follicle.