In the developing retina, the gene encoding the 3 subunit of the neuronal nicotinic receptor, a specific marker of retinal ganglion cells, is under the direct control of the atonal homolog 5 (ATH5) basic helix-loophelix (bHLH) transcription factor. Although quite short (143 bp in length), the 3 promoter has the remarkable capacity to discriminate between ATH5 and the other neuronal bHLH proteins expressed in the developing nervous system. We have identified three amino acids within the basic domain that confer specificity to the ATH5 protein. These residues do not mediate direct DNA binding but are required for interaction between ATH5 and chromatin-associated proteins during retina development. When misexpressed in neurons, the myogenic bHLH factor MyoD is also able to activate the 3 gene. This, however, is achieved not by binding of the protein to the promoter but by dimerization of MyoD with a partner, a process that depends not on the basic domain but on the HLH domain. By sequestering an E-box-binding protein, MyoD relieves the active repression that blocks the 3 promoter in most neurons. The mechanisms used by bHLH proteins to activate 3 thus highlight how ATH5 is selected by the 3 promoter and coordinates the derepression and transcriptional activation of the 3 gene during the specification of retinal ganglion cells.The basic helix-loop-helix (bHLH) transcription factors have emerged as a major class of positive and negative regulators in the processes of neural cell fate specification and differentiation (1,3,36). bHLH proteins share extensive homology within the basic and helix-loop-helix domains that mediate, respectively, binding to the DNA consensus E-box sequence CANNTG and dimerization (17,25). Structural and biochemical analyses show that tissue-specific bHLH proteins (class B) form functional, DNA-binding heterodimers with the ubiquitously expressed bHLH proteins (class A) (14,19,26). Some HLH transcription factors lack the DNA binding "b" domain (Id proteins) and act as dominant-negative regulators by forming inactive heterodimers with bHLH proteins (2). Id proteins are expressed in proliferating neural progenitors during neurogenesis, and their expression is maintained in some tissues late in development and into adulthood (reviewed in reference 35).Structure-function studies of bHLH proteins have revealed that important groups of residues are located in the basic domain, as exemplified by the conserved myogenic motif (4, 7), which can be transferred from a myogenic factor into the basic domain of a class A protein such as E12, thereby imparting myogenic potential on the hybrid (4,8). No such motif has been identified in the neuronal bHLH factors. Domain swapping experiments between Drosophila melanogaster atonal and achaete-scute proteins have shown that the basic domain of atonal is able to promote an atonal-specific neuronal cell fate (6) and that all differing residues are functionally important. A few studies have reported on the contributions of the HLH domain to the cell type dete...