Metallothioneins are small, cysteine-rich proteins that avidly bind heavy metals such as zinc, copper, and cadmium to reduce their concentration to a physiological or nontoxic level. Metallothionein gene transcription is induced by several stimuli, notably heavy metal load and oxidative stress. Transcriptional induction of metallothionein genes is mediated by the metal-responsive transcription factor 1 (MTF-1), an essential zinc finger protein that binds to specific DNA motifs termed metal-response elements. In cell-free DNA binding reactions with nuclear extracts, MTF-1 requires elevated zinc concentrations for efficient DNA binding but paradoxically is inactivated by other in vivo inducers such as cadmium, copper, and hydrogen peroxide. Here we have developed a cell-free, MTF-1-dependent transcription system which accurately reproduces the activation of metallothionein gene promoters not only by zinc but also by these other inducers. We found that while transcriptional induction by zinc can be achieved by elevated zinc concentration alone, induction by cadmium, copper, or H2O2 additionally requires the presence of zinc-saturated metallothionein. This is explained by the preferential binding of cadmium or copper to metallothionein or its oxidation by H2O2; the concomitant release of zinc in turn leads to the activation of transcription factor MTF-1. Conversely, thionein, the metal-free form of metallothionein, inhibits activation of MTF-1. The release of zinc from cellular components, including metallothioneins, and the sequestration of zinc by newly produced apometallothionein might be a basic mechanism to regulate MTF-1 activity upon cellular stress.