Functional short tandem repeats (STR) are polymorphic in the population, and the number of repeats regulates the expression of nearby genes (known as expression STR, eSTR). STR in IGF1 promoter has been extensively studied for its association with IGF1 concentration in blood and various clinical traits and represents an important eSTR. We previously used an in-vitro luciferase reporter model to examine the interaction between STRs and SNPs in IGF1 promoter. Here, we further explored the mechanism how the number of repeats of the STR regulates gene transcription. An inverse correlation between the number of repeats and the extent of transactivation was found in a haplotype consisting of three promoter SNPs (C-STR-T-T). We showed that these adjacent SNPs located outside the STR were required for the STR to function as eSTR. The C allele of rs35767 provides a binding site for CCAAT/enhancer-binding-protein δ (C/EBPD), which is essential for the gradational transactivation property of eSTR and FOXA3 may also be involved. Therefore, we propose a mechanism in which the gradational transactivation by the eSTR is caused by the interaction of one or more transcriptional complexes located outside the STR, rather than by direct binding to a repeat motif of the STR.