Porphobilinogen deaminase is the third enzyme in the heme biosynthetic pathway. hem3 mutants in Saccharomyces cerevisiae are deficient in porphobilinogen deaminase activity. We have isolated the HEM3 gene by complementation of the heme auxotrophy of a hem3 mutant. Sequence analysis reveals an open reading frame of 981 nucleotides. The derived amino acid sequence of the protein encoded by HEM3 shows extensive homology to the reported sequences for porphobilinogen deaminase from a number of other sources, indicating that HEM3 is the structural gene for porphobilinogen deaminase. Earlier reports have suggested that expression of HEM3 is induced by porphobilinogen, the substrate of the encoded enzyme. We have investigated the transcription of HEM3 and have found that it is not affected by the ability of the cell to make porphobilinogen or heme. However, we have found that HAP2 and HAP3 gene products are involved in the expression of HEM3. An important element required for expression of HEM3 has been localized to a small region that contains a sequence homologous to the HAP2-3-4 binding sites of several genes including HEM1. These findings suggest that HEM3 expression is regulated in the same manner as that of HEM1 which encodes the first enzyme of the heme biosynthetic pathway.