MSG1 is a recently described melanocyte-specific nuclear protein whose biochemical function is unknown [Shioda et al. (1996) Proc. Natl. Acad. Sci. USA 93, 12298-12303]. Two human cDNA sequences found in the EST (expressed sequence tag) database were predicted to encode a small peptide (45 aa) that showed 69% identity to the C-terminal sequence of MSG1, suggesting the existence of a novel MSG1-related protein. Based on these EST sequences, we isolated a novel gene, MRG1 (MSG1-Related Gene 1), by the 5'-RACE (rapid amplification of cDNA ends) technique. The MRG1 mRNA transcript is expressed widely and encodes a nuclear protein that share two highly conserved domains, CR1 (14 aa) and CR2 (approx. 50 aa), with MSG1. The CR2 domain is significantly acidic and activates transcription in yeast cells. The full-length MSG1 and MRG1 fused to GAL4 DNA-binding domain activates transcription in mammalian cells, and this is dependent on the presence of the CR2 domain. These results suggest that MRG1 and MSG1 may function as transcription activators.