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Aims Hepatocyte nuclear factor-1α (HNF-1α) regulates the expression of genes encoding proteins involved in glucose metabolism and insulin secretion. Mutations in the HNF-1α gene cause maturity-onset diabetes of the young Type 3. However, the mechanism leading to this disease has not been completely ascertained. Previously, we found a novel mutation in the regulatory element of the human HNF-1α gene in two Chinese diabetes pedigrees. The nucleotide at position -128 T was substituted by G (nt-128 T→G). In this study, we analysed the functional defect of nt-128 T→G in HNF-1α transcription activity. Methods Luciferase reporter gene assays were carried out to examine the functional characteristics of this mutant. Electrophoretic mobility shift assays and chromatin immunoprecipitation were performed to confirm the binding of nuclear proteins to oligonucleotides. Results The variant construct (nt-128 T→G) had a 1.65-fold increase in promoter activity compared with that of the wild-type construct in HepG2 cells and a 1.33-fold increase in MIN6 cells, respectively. The variant resided at a FOXA/HNF-3 binding site identified by a series of competitive electrophoretic mobility shift assays and antibody supershift analyses. The assays showed a differential binding affinity in the wild-type and the nt-128 T→G mutant fragments by FOXA/HNF-3. Chromatin immunoprecipitation indicated that FOXA/HNF-3 bound to this region in vivo. One nucleotide substitution in the FOXA/HNF-3 site in the human HNF-1α regulatory element caused an increase of HNF-1α transcriptional activity. Conclusions Our data suggested that this substitution in the promoter region affects DNA-protein interaction and HNF-1α gene transcription. The mutant may contribute to the development of diabetes in these two nt-128 T→G pedigrees of Chinese. [ABSTRACT FROM AUTHOR]