We used comparative genetics to investigate the location, structure and evolution of the oxytocin and vasopressin gene regulatory regions. The pufferfish, Fugu rubripes, is an attractive vertebrate model for comparison because of its maximal evolutionary distance from mammals and short intergenic regions. To determine whether regulatory DNA is conserved between oxytocin and vasopressin, and their Fugu homologs, isotocin and vasotocin, we generated transgenic mice bearing overlapping Fugu cosmids that contained the isotocin and/or vasotocin genes as well as short isotocin (5 kb) and vasotocin (9 kb) constructs. Our study shows that the Fugu isotocin and vasotocin genes express specifically in the mouse oxytocinergic and vasopressinergic neurones, respectively, and that the cis-regulatory elements which mediate neurone-specific expression are located within the short transgene constructs tested. Thus, the neurone-specific expression of the oxytocin and vasopressin gene families, and the mechanisms mediating the cell-specificity, evolved before the divergence of the fish and mammalian lineages. Salt-loading of transgenic mice induced an increase in abundance of isotocin, but not vasotocin mRNA in the cognate neurones. It appears that either the vasotocin gene does not respond to osmotic perturbations or the vasotocin transgene construct tested lacks osmotic response elements. Comparisons of homologous flanking sequences of the Fugu and mouse genes identified several short matching sequences, which are candidate regulatory elements.