Inducible genes are expressed in the presence of an external stimulus. Individual cells may exhibit either a binary or graded response to such signals. It has been hypothesized that the chemical kinetics of transcription factor/DNA interactions can account for both these scenarios (EMBO J. 9(9) (1990) 2835; BioEssays 14(5) (1992) 341). To explore this question, we have conducted work based on the experimental results of Fiering et al. (Genes Dev. 4 (10) (1990) 1823). In these experiments, three upstream NF-AT binding sites control transcription of the lacZ gene, which codes for the enzyme beta-Galactosidase. The experimental data show a binary response for this system. We consider the effects of fluctuations in NF-AT binding on the response of the system. Our modeling results are in good qualitative agreement with the experimental data, and illustrate how the binary and graded responses can stem from the same underlying mechanism.