The SRY gene functions as a genetic switch in gonadal ridge initiating testis determination. The mouse Sry and human SRY open reading frames (ORFs) share a conserved DNA-binding domain (the HMG-box) yet exhibit no additional homology outside this region. As judged by the accumulation of lacZ-SRY hybrid proteins in the nucleus, both the human and mouse SRY ORFs contain a nuclear localization signal. The mouse Sry HMG-box domain selectively binds the sequence NACAAT in vitro when challenged with a random pool of oligonucleotides and binds AACAAT with the highest affinity. When put under the control of a heterologous promotor, the mouse Sry gene activated transcription of a reporter gene containing multiple copies of the AACAAT binding site. Activation was likewise observed for a GAL4-responsive reporter gene, when the mouse Sry gene was linked to the DNA-binding domain of GAL4. Using this system, the activation function was mapped to a glutamine/histidine-rich domain. In addition, LexA-mouse Sry fusion genes activated a LexA-responsive reporter gene in yeast. In contrast, a GAL4-human SRY fusion gene did not cause transcriptional activation. These studies suggest that both the human and the mouse SRY ORFs encode nuclear, DNA-binding proteins and that the mouse Sry ORF can function as a transcriptional activator with separable DNA-binding and activator domains.