A murine cardiac-specific homeodomain gene named csx (Komuro, I., and Izumo, S, (1993) Proc. Natl. Acad, Sci, U, S, A. 90, 8145-8149) and nkx-2.5 (Lints, T, J,, Parsons, L, M,, Hartley, L,, Lyons, I,, and Harvey, R. P, (1993) Development 119, 419-431) was identified as a potential vertebrate homologue of Drosophila tinman, a mesoderm determination factor required for insect heart formation (Bodmer, R, (1993) Development 118, 719-729), Bacterial expression of the nkx-2.5 homeodomain allowed us to identify downstream DNA targets from a library of randomly generated oligonucleotides. High affinity nkx-2.5 DNA binding sites, 5'-TNNAGTG-3', represented novel binding sequences, whereas intermediate and weaker affinity sites, 5'-C(APT)TTAATTN-3', contained the typical 5'-TAAT-3' core required by most homeodomain factors for DNA binding, We also ob served that nkx-2.5 served as a modest transcription activator in transfection assays done in 10T1/2 fibroblasts with multimerized binding sites linked to a luciferase reporter gene, Functional dissection of nkx-2.5 revealed a COOH-terminal inhibitory domain composed mainly of clusters of alanines and prolines, which appeared to mask a potent activation domain composed of hydrophobic and highly charged amino acids.