Nonsteroidal anti-inflammatory drugs (NSAIDs) have been shown to have chemopreventive activity, but the mechanisms involved are not clearly understood. Although NSAIDs inhibit cyclooxygenase activity, they also increase the expression of a divergent member of the transforming growth factor-beta superfamily, termed NSAID-activated gene 1 (NAG-1), a protein with an antitumorigenic and proapoptotic activity that could in part be linked to the chemoprevention activity of NSAIDs. NAG-1 is induced by some NSAIDs, but the mechanisms responsible are not clear. In this report, we have identified a cis-acting element responsive to NSAIDs located within the -73 to -51 region of the NAG-1 promoter. This region contains overlapping EGR-1 and Sp1 binding sites, and mutations in this region suggest that the transcription factors have an important role in NSAID-induced NAG-1 expression. EGR-1 was found to play a critical role in the induction of NAG-1 by sulindac sulfide and other NSAIDs. NSAIDs increase EGR-1 protein expression that occurs before the induction of NAG-1 expression, supporting the hypothesis that EGR-1 is necessary for NSAID-induced NAG-1 expression. Thus, NSAIDs induce the expression of EGR-1, a tumor suppressor gene, providing a novel mechanism to explain, in part, the antitumorigenic properties of some NSAIDs. NAG-1 seems to be an important downstream target protein of this transcription factor, EGR-1, and may mediate the chemopreventive activity of some NSAIDs.