The mouse dihydrofolate reductase gene (dhfr) is a housekeeping gene expressed under the control of a promoter region embedded in a CpG island--a region rich in unmethylated CpG dinucleotides. A divergent transcription unit exists immediately upstream of the dhfr gene which is coamplified with dhfr in some but not all methotrexate-resistant cell lines. We show that the promoter region for this gene pair consists of two bidirectional promoters, a major and minor promoter, which are situated within a 660-base-pair region upstream of the dhfr ATG translation initiation codon. The major promoter controls over 90% of dhfr transcription, while the minor promoter directs the transcription of the remaining dhfr mRNAs. The major promoter functions bidirectionally, transcribing a divergent 4.0-kilobase poly(A) mRNA (class A) in the direction opposite that of dhfr transcription. The predicted protein product of this mRNA is 105 kilodaltons. The minor promoter also functions bidirectionally, directing the transcription of at least two divergent RNAs (class B). These RNAs, present in quantities approximately 1/10 to 1/50 that of the class A mRNAs, are 4.4- and 1.6-kilobase poly(A) mRNAs. cDNAs representing both class A and class B mRNAs have been cloned from a mouse fibroblast cell line which has amplified the dhfr locus (3T3R500). DNA sequence analysis of these cDNAs reveals that the class A and class B mRNAs share, for the most part, the same exons. On the basis of S1 nuclease protection analysis of RNA preparations from several mouse tissues, both dhfr and divergent genes showed similar levels of expression but did show some specificity in start site utilization. Computer homology searches have revealed sequence similarity of the divergent transcripts with bacterial genes involved in DNA mismatch repair, and we therefore have named the divergently transcribed gene Rep-1.