beta-Cell differentiation factor Nkx6.1 is a homeodomain protein expressed in developing and mature beta-cells in the pancreatic islets of Langerhans, To understand how it contributes to beta-cell development and function, we characterized its DNA binding and transactivation properties. A single copy of the homeodomain of Nkx6.1 binds to a strictly conserved 8-base pair DNA consensus sequence, TTAATTAC; even minor variations to this consensus reduce DNA binding affinity significantly. Full-length Nkx6.1, however, has markedly reduced DNA binding affinity due to an acidic domain at the carboxyl end of the molecule that functions as a mobile binding interference domain capable of interrupting the interaction between DNA and DNA binding domains of the helix-turn-helix type. When expressed in fibroblast cell. lines, Nkx6.1 represses transcription through isolated Nkx6.1 binding sites; in beta-cell lines, Nkx6.1 specifically represses the intact insulin promoter through TAAT-containing sequences. In Gal4 one-hybrid fusion studies, transcriptional repression maps to a discreet region within the amino terminus. Our findings suggest a model in which Nkx6.1, regulated by interactions through its carboxyl terminus, directs the repression of specific genes in developing and mature beta-cells.