Neurospora crassa possesses an inducible L-phenylalanine ammonia-lyase that is expressed only when cells are derepressed for nitrogen in the presence of L-phenylalanine. Enzyme synthesis requires both induction by L-phenylalanine and simultaneous nitrogen catabolite derepression. Carbon limitation in the presence of phenylalanine does not elicit induction of L-phenylalanine ammonia-lyase. Specific induction by L-phenylalanine is required, and other amino acids completely failed to induce any lyase activity. The nit-2 gene is a major regulatory locus which is believed to mediate nitrogen catabolite repression in Neurospora. Mutants of nit-2 fail to express any phenylalanine ammonia-lyase activity under conditions of derepression and induction which lead to good enzyme induction in the wild type and in nit-2 revertants. The loss of lyase activity in nit-2 mutants does not result from inducer exclusion, which suggests that the nit-2 gene product has a direct role in controlling the expression of this enzyme. Substantial amounts of the enzyme were detected in the growth medium as well as in cell extracts. Inhibitors of protein synthesis or RNA synthesis block the induction of L-phenylalanine ammonia-lyase, suggesting that expression of this enzyme is controlled at the level of transcription.