Androgens and mesenchymal factors are essential extracellular signals for the development as well as the functional activity of the prostate epithelium. Little is known of the intraepithelial determinants that are involved in prostatic differentiation. Here we found that hepatocyte nuclear factor-3 alpha (HNF-3 alpha), an endoderm developmental factor, is essential for androgen receptor (AR)-mediated prostatic gene activation. Two HNF-3 cis-regulatory elements were identified in the rat probasin (PB) gene promoter, each immediately adjacent to an androgen response element. Remarkably, similar organization of HNF-3 and AR binding sites was observed in the prostate-specific antigen (PSA) gene core enhancer, suggesting a common functional mechanism. Mutations that disrupt these HNF-3 motifs significantly abolished the maximal androgen induction of PB and PSA activities. Overexpressing a mutant HNF-3 alpha deleted in the C-terminal region inhibited the androgen-induced promoter activity in LNCaP cells where endogenous HNF-3 alpha is expressed. Chromatin immunoprecipitation revealed in vivo that the occupancy of HNF-3 alpha on PSA enhancer can occur in an androgen-depleted condition, and before the recruitment of ligand-bound AR. A physical interaction of HNF-3 alpha and AR was detected through immunoprecipitation and confirmed by glutathione-S-transferase pull-down. This interaction is directly mediated through the DNA-binding domain/hinge region of AR and the forkhead domain of HNF-3 alpha. In addition, strong HNF-3 alpha expression, but not HNF-3 beta or HNF-3 gamma, is detected in both human and mouse prostatic epithelial cells where markers (PSA and PB) of differentiation are expressed. Taken together, these data support a model in which regulatory cues from the cell lineage and the extracellular environment coordinately establish the prostatic differentiated response.