The COUP transcription factors (COUP-TF and ARP-1) are the most highly conserved members of the nuclear receptor superfamily throughout evolution. Previous studies indicated that COUP orphan receptors may be involved in early neurogenesis in Drosophila and zebrafish. Here we identified a neural-specific gene, arrestin, whose transcription can be regulated by endogenous COUPs through a DR-7 element (direct repeat with a 7-base pair spacer) located upstream of the transcription start site. Importantly, the COUP binding site of the arrestin gene promoter is conserved among mouse, bovine, and human. However, the mouse element is also capable of responding to retinoic acid while the element in the human gene does not. Expression of COUP-TF correlates with the known expression sites of the arrestin gene in vivo, notably during the differentiation of the retina. We also show that COUP-TF is expressed in a spatio-temporally defined pattern in the murine central nervous system during embryogenesis. It appears that the expression pattern of COUP-TF is unique in certain regions of the developing brain, which would indicate a novel role for COUP-TF and/or ARP-1, distinct from their role in restricting other hormonal signaling pathways. Together our data suggest that COUPs play a crucial role in controlling a subset of neural-specific programs during development.