We have isolated and characterized the Saccharomyces cerevisiae PTR3 gene by functional complementation of a mutant deficient for amino acid-inducible peptide transport. PTR3 is predicted to encode a protein of 678 amino acids that exhibits no similarity to any other protein in the database. Deletion of the PTR3 open reading frame pleiotropically reduced the sensitivity to toxic peptides and amino acid analogues. Initial rates of radiolabelled dipeptide uptake demonstrated that elimination of PTR3 resulted in the loss of amino acid-induced levels of peptide transport. PTR3 was required for amino acid-induced expression of PTR2, the gene encoding the dipeptide/tripeptide transport protein, but was not necessary for nitrogen catabolite repression of peptide import or PTR2 expression. It was determined that PTR3 also modulates expression of BAP2, the gene encoding the branched-amino acid permease. Furthermore, we present genetic evidence that suggests that PTR3 functions within a novel regulatory pathway that facilitates amino acid induction of the PTR system.