ABSTRACT Drosophila paired, a homolog of mammalian Pax-3, is key to the coordinated regulation of segment-polarity genes during embryogenesis. The paired gene and its homologs are unusual in encoding proteins with two DNA-binding domains, a paired domain and a homeodomain. We are using an in vivo assay to dissect the functions of the domains of this type of molecule. In particular, we are interested in determining whether one or both DNAbinding activities are required for individual in vivo functions of Paired. We constructed point mutants in each domain designed to disrupt DNA binding and tested the mutants with ectopic expression assays in Drosophila embryos. Mutations in either domain abolished the normal regulation of the target genes engrailed, hedgehog, gooseberry and even-skipped, suggesting that these in vivo functions of Paired require DNA binding through both domains rather than either domain alone. However, when the two mutant proteins were placed in the same embryo, Paired function was restored, indicating that the two DNAbinding activities need not be present in the same molecule. Quantitation of this effect shows that the paired domain mutant has a dominant-negative effect consistent with the observations that Paired protein can bind DNA as a dimer.