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Single-cell analysis has revealed that transcription is dynamic and stochastic, but tools are lacking that can determine the mechanism operating at a single gene. Here we utilize single-molecule observations of RNA in fixed and living cells to develop a single-cell model of steroid-receptor mediated gene activation. We determine that steroids drive mRNA synthesis by frequency modulation of transcription. This digital behavior in single cells gives rise to the well-known analog dose response across the population. To test this model, we developed a light-activation technology to turn on a single steroid-responsive gene and follow dynamic synthesis of RNA from the activated locus.