To gain insight into the function of zinc finger protein 106 (ZFP106), we analyzed its subcellular targeting and identified its interacting proteins. Although ZFP106 was detected predominantly in the fibrillar component of the nucleolus and co-localized with the nucleolar transcriptional machinery, its overexpression did not affect transcription of pre-ribosomal RNA genes. The nucleolar association of ZFP106 did neither require ongoing ribosomal RNA synthesis nor nucleolar chromatin indicating that a protein-protein interaction confines ZFP106 to the nucleolus. Deletion analysis revealed that the C-terminal WD40 repeat region functions in nucleolar targeting. This domain interacts with the product of testis-specific gene 118 (TSG118), which also co-localizes with ZFP106 in the nucleolus. Rapid downregulation of TSG118 expression during in vitro terminal differentiation coincides with a loss of nucleolar ZFP106. By its structural features and expression, TSG118 mimics nucleostemin, a nucleolar protein linked to the proliferation potential of stem cells. A two-hybrid screen with the N-terminal region of ZFP106 as bait led to the isolation of testis-specific Y-encoded-like protein (TSPYL), a member of the nucleosome assembly protein family. A frame-shift mutation in TSPYL has recently been found to cause a sudden infant death syndrome with testis dysgenesis. Specific recruitment of ZFP106 via amino acids 412-781 into TSPYL-positive nucleoplasmic bodies requires a TSPYL domain absent in the mutant protein of patients with testis dysgenesis. These results identify ZFP106 as a potential player in a novel pathway involved in testis development.