Dlx5, a member of the Dlx family of homeodomain proteins, plays a critical role in bone development and fracture healing. To understand the molecular mechanism underlying the transcriptional regulation by Dlx5, we performed yeast two-hybrid screening and isolated a novel protein, Dlxin-1, that binds Dlx5 and regulates its transcriptional function. Dlxin-1 cDNA encodes a 775-amino acid protein that has a partial homology with necdin at the C terminus and 25 repeats of hexapeptides (WQXPXX) in the middle region. Dlxin-1 mRNA is expressed in various adult tissues, but not the spleen, and also in osteoblastic and chondrogenic cell lines. During embryogenesis, a strong signal for Dlxin-1 mRNA was found in cell layers surrounding cartilaginous elements in bone rudiment during digit formation. Dlxin-1 binds not only Dlx5 but also Dlx7 and Msx2 and forms homomultimers in vivo. Transfection and reporter gene assays indicate that Dlxin-1 activates the transcriptional function of Dlx5. Therefore, Dlxin-1 may act as a regulator of the function of Dlx family members in bone formation.