In this study we evaluate, for the first time, the molecular mechanism that underlies the extinction of a tissue-specific transcription factor, Oct-3/4, in somatic cell hybrids and compared it with its down-regulation in retinoic acid (RA)-treated embryonal carcinoma (EC) cells. The Oct-3/4 gene, which belongs to the POU family of transcription factors and is abundantly expressed in EC (OTF9-63) cells, provides an excellent model system with which to study the extinction phenomenon. Unlike other genes whose expression has been repressed in hybrid cells but not during in vivo differentiation, Oct-3/4 expression is dramatically repressed in OTF9-63 x fibroblast hybrids and also during embryogenesis. The ectopic expression of Oct-3/4 in hybrid cells under a constitutive promoter is sufficient for transcriptional activation of an octamer-dependent promoter. These results argue against the possibility that fibroblasts contain a direct repressor which binds directly to the octamer sequence and prevents Oct-3/4 protein from binding. The extinction of Oct-3/4 binding activity in the hybrid cells occurs at the level of mRNA transcription, similarly to the repression of Oct-3/4 transcription during in vivo differentiation. This shutdown of Oct-3/4 transcription in hybrid cells and in RA-treated EC cells is accompanied by de novo methylation of its 1.3-kb upstream region. In contrast to EC cells, in which this region is sensitive to MspI digestion, in hybrid cells and in RA-treated EC cells, the Oct-3/4 upstream region is resistant to MspI digestion, which suggests a change in its chromatin structure. Furthermore, extinction is not restricted to the endogenous Oct-3/4 gene but is also exerted upon a transiently transfected reporter gene driven by the Oct-3/4 upstream region. Thus, changes in the cellular activity of trans-acting factors acting on the upstream region also contribute to the inability of the hybrid and RA-treated EC cells to generate Oct-3/4 transcripts. In conclusion, this study draws a connection between the shutdown of Oct-3/4 expression in RA-differentiated EC cells and its extinction in hybrid cells. In both systems, repression of Oct-3/4 expression is achieved through changes in the methylation status, chromatin structure, and transcriptional activity of the Oct-3/4 upstream regulatory region.