The cell adhesion molecule L1 regulates axonal guidance and fasciculation during development. We previously identified the regulatory region of the L1 gene and showed that it was sufficient for establishing the neural pattern of L1 expression in transgenic mice. In the present study, we characterize a DNA element within this region called the HPD that contains binding motifs for both homeodomain and Pax proteins and responds to signals from bone morphogenetic proteins (BMPs). An ATTA sequence within the core of the HPD was required for binding to the homeodomain protein Barx2 while a separate paired domain recognition motif was necessary for binding to Pax-6. In cellular transfection experiments, L1-luciferase reporter constructs containing the HPD were activated an average of 4-fold by Pax-6 in N2A cells and 5-fold by BMP-2 and BMP-4 in Ng108 cells. Both of these responses were eliminated on deletion of the HPD from L1 constructs. In transgenic mice, deletion of the HPD from an L1-lacZ reporter resulted in a loss of beta-galactosidase expression in the telencephalon and mesencephalon. Collectively, our experiments indicate that the HPD regulates L1 expression in neural tissues via homeodomain and Pax proteins and is likely to be a target of BMP signaling during development.