Hox proteins frequently select and regulate their specific target genes with the help of cofactors like Extradenticle (Exd) and Homothorax (Hth). For the Drosophila Hox protein Sex combs reduced (Scr), Exd has been shown to position a normally unstructured portion of Scr so that two basic amino acid side chains can insert into the minor groove of an Scr-specific DNA-binding site. Here we provide evidence that another Drosophila Hox protein, Deformed (Dfd), uses a very similar mechanism to achieve specificity in vivo, thus generalizing this mechanism. Furthermore, we show that subtle differences in the way Dfd and Scr recognize their specific binding sites, in conjunction with non-DNA-binding domains, influence whether the target gene is transcriptionally activated or repressed. These results suggest that the interaction between these DNA-binding proteins and the DNA-binding site determines the architecture of the Hox–cofactor–DNA ternary complex, which in turn determines whether the complex recruits coactivators or corepressors.