The development of melanocytes, which are pigment-producing cells responsible for skin, hair, and eye color, is absolutely dependent on the action of the microphthalmia basic helix-loop-helix-leucine zipper (bHLH-LZ) transcription factor (Mi); mice lacking a functional Mi protein are entirely devoid of pigment cells. Mi has been shown to activate transcription of the tyrosinase, TRP-1, TRP-2, and QNR-71 genes through specific E-box elements, most notably the highly conserved M box. We investigated the mechanism which enables Mi to be recruited specifically to a restricted subset of E boxes in target promoters while being prevented from binding E-box elements in other promoters. We show both in vitro and in vivo that the presence of a T residue flanking a CATGTG E box is an essential determinant of the ability of Mi to bind DNA, and we successfully predict that the CATGTG E box from the P gene would not bind Mi. In contrast, no specific requirement for the sequences flanking a CACGTG E box was observed, and no binding to an atypical E box in the c-Kit promoter was detected. The relevance of these observations to the control of melanocyte-specific gene expression was highlighted by the fact that the E-box elements located in the tyrosinase, TRP-1, TRP-2, and QNR-71 promoters without exception possess a 5' flanking T residue which is entirely conserved between species as diverse as man and turtle. The ability of Mi to discriminate between different E-box motifs provides a mechanism to restrict the repertoire of genes which are likely to be regulated by Mi and provides insight into the ability of bHLH-LZ transcription factors to achieve the specificity required for the precise coordination of transcription during development.