Fibroblast growth factor 4 (FGF-4) has been shown to be a signaling molecule whose expression is essential for postimplantation mouse development and, at later embryonic stages, for limb patterning and growth. The FGF-4 gene is expressed in the blastocyst inner cell mass and later in distinct embryonic tissues but is transcriptionally silent in the adult. In tissue culture FGF-4 expression is restricted to undifferentiated embryonic stem (ES) cells and embryonal carcinoma (EC) cell lines. Previously, we determined that EC cell-specific transcriptional activation of the FGF-4 gene depends on a synergistic interaction between octamer-binding proteins and an EC-specific factor, Fx, that bind adjacent sites on the FGF-4 enhancer. Through the cloning and characterization of an F9 cell cDNA we now show that the latter activity is Sox2, a member of the Sry-related Sox factors family. Sox2 can form a ternary complex with either the ubiquitous Oct-1 or the embryonic-specific Oct-3 protein on FGF-4 enhancer DNA sequences. However, only the Sox2/Oct-3 complex is able to promote transcriptional activation. These findings identify FGF-4 as the first known embryonic target gene for Oct-3 and for any of the Sox factors, and offer insights into the mechanisms of selective gene activation by Sox and octamer-binding proteins during embryogenesis.