A locus within chromosome XIII of Saccharomyces cerevisiae containing four genes upregulated by osmotic stress has been characterized. Two of the genes, but not their osmotic induction, were already described: the DNA damage-inducible gene DDR48 and the protease inhibitor gene PAI3. The two novel genes encode a cytoplasmic aldehyde dehydrogenase (ALD2) and a peptide of unknown function (SIP18). These genes form a cluster of two pairs of divergent promoters regulated by osmotic stress. The regulation of the divergent ALD2 and DDR48 genes, however, occurs by different mechanisms. ALD2 exhibits maximum induction with 0.3 M NaCl, negative regulation by protein kinase A and dependence on PBS2 and HOG1 protein kinases for osmotic induction. DDR48 requires 1 M NaCl for maximum induction and its expression is independent of PBS2 and HOG1 protein kinases and less sensitive to protein kinase A. PAI3 and SIP18 are as dependent on the above protein kinases as ALD2. Deletion analysis indicates that most of the regulation of the ALD2 promoter is mediated by a negative element counteracted by osmotic stress.