Transcription regulatory domains of the Prx1a and Prx1b homeoproteins were analyzed in transient transfection assays using artificial promoters as well as an established downstream target promoter (tenascin-c). Activation and repression domains were detected in their common amino end. In the carboxyl end of Prx1a an activation domain and an inhibition/masking region (OAR domain) were detected. The Prx1b isoform, generated by alternative splicing, does not contain these carboxyl activation or inhibition domains. Instead, the data demonstrate that the carboxyl tail of Prx1b contains a potent repressor region. This difference in the carboxyl tail accounts for a 45-fold difference observed in transcription regulatory activity between Prx1a and Prx1b. The data also support the likelihood that this difference between Prx1a and Prx1b is higher in the presence of still undetermined cofactors. DNA binding affinities of Prx1a, Prx1b, and a series of truncation mutants were also examined. The carboxyl tail of Prx1a, which inhibited transcription activation in the transfection assays, also inhibited DNA binding. These differences in biochemical function between Prx1a and Prx1b, as well as the recently described activities of Prx2, provide a mechanism for the unequal compensation between the Prx1 and Prx2 loci.Paired type homeobox transcription factors are important regulators of morphogenetic processes and have been conserved in a diverse selection of species. The Prx1 and Prx2 genes are members of this class and thus encode proteins that contain a paired type DNA binding homeodomain but lack a second DNA binding domain (i.e. the paired domain) present in other paired related homeoproteins (1, 2). Prx1 (also known as mhox, k2, Pmx, PRRX1) (3-6) and Prx2 (also known as S8 and PRRX2) (6 -8) are 97% identical within their homeodomains and 64% identical over the entire molecule. This high degree of sequence homology as well as similar expression and genomic organization suggest that Prx1 and Prx2 are the result of a gene duplication event (3-6, 8 -10).Despite many similarities, important differences in splicing of Prx1 and Prx2 are evident. Alternative splicing of Prx1