In an effort to determine whether homeobox genes modulate the activity of the promoter of the mouse neural cell adhesion molecule (N-CAM) gene, we have carried out a series of cotransfection experiments using NIH 3T3 cells. Plasmids were constructed containing Xenopus laevis Hox-2.5 and -2.4 coding sequences linked to a human cytomegalovirus promoter (CMV-Hox-2.5 and CMV-Hox-2.4). A 4.9-kilobase DNA fragment containing 5' flanking and first exon sequences of the mouse N-CAM gene was linked to a chloramphenicol acetyltransferase (CAT) reporter gene (N-CAM-Pro-CAT). Cotransfection with CMV-Hox-2.5 and N-CAM-Pro-CAT resulted in a strong induction of CAT activity. The N-CAM promoter contained two potential homeodomain binding sites (sites I and II) within a 47-base-pair segment (512-559 base pairs upstream of the ATG codon in the first exon of the N-CAM gene). This segment was linked to a minimal promoter (simian virus 40 early) and a downstream CAT gene. Although this construct was transcriptionally active at a low level in NIH 3T3 cells, cotransfection of CMV-Hox-2.5 resulted in CAT activity that was greatly elevated. Mutational studies revealed that it was the homeodomain binding site II sequence that was required for this regulation. In contrast, cotransfection with CMV-Hox-2.4 eliminated the CAT activity that was driven by the CMV-Hox-2.5 construct. Thus, the products of two related Hox genes, which are located adjacent to each other in the Hox-2 complex, can differentially modulate transcription from the promoter of a cell adhesion molecule gene. The results suggest that the N-CAM gene is likely to be a target for regulation by Hox gene products.