Differential transcription of the Xenopus gene families encoding the oocyte and somatic 5S ribosomal RNAs can be reproduced in vitro with cell-free extracts prepared from Xenopus oocytes and unfertilized eggs. The transcriptional activities of these genes as assayed in these in vitro systems are a consequence of large differences in the rates of assembly of active transcription complexes. The somatic 5S genes sequester limiting transcription factors much more rapidly than the corresponding oocyte 5S genes and, as a consequence, are far more active. However, once transcription complexes are formed, these complexes are stable on both of these genes. Previous studies have established that transcription factors IIIA and IIIC are sufficient to form a stable protein-DNA complex on the somatic 5S gene. The rate of formation of the stable TFIIIA+C complex for the oocyte gene is far slower than that for the somatic 5S gene. Insertion of the DNA binding site for TFIIIC2 (the B-block promoter element from tRNA genes) into the 3' flanking region of a synthetic oocyte 5S gene increases the transcription efficiency and rate of transcription complex assembly of this gene relative to the parent gene lacking the B-block element. Our results support a model in which competition for limiting transcription factors plays a pivotal role in establishing differential transcription of the two classes of 5S genes during early embryogenesis.