The foot of the simple metazoan Hydra is a highly dynamic body region of constant tissue movement, cell proliferation, determination and differentiation. Previously, two genes have been shown to participate in the development and differentiation of this body region: homeodomain factor CnNK-2 and signal peptide pedibin [Dev. Biol. 180 (1996) 473; Development 126 (1999) 517; Development 122 (1996) 1941; Mech. Dev. 106 (2001) 37]. CnNk-2 functions as transcriptional regulator and is responsive to changes in the positional value while the secreted peptide pedibin serves as "extrinsic" positional signal. Exposure of polyps to pedibin increases the spatial domain of CnNK-2 expression towards the gastric region, indicating that positional signals are integrated at the cis-regulatory region of CnNK-2. In the present study, to elucidate the molecular basis of the interaction of CnNK-2 and pedibin, we characterized the 5' regulatory regions of both genes. Within the CnNK-2 5' upstream region, electrophoretic mobility shift assays showed that putative NK-2 binding motifs are specifically bound by both nuclear protein from Hydra foot and by recombinant CnNK-2, suggesting that CnNK-2 might autoregulate its own expression. This is the first indication for an autoregulatory circuit in Hydra. In addition, we also identified NK-2 binding sites in the cis-regulatory region of the pedibin gene, indicating that this gene is one of the targets of the transcription factor CnNK-2. On the basis of these results, we present a model for the regulatory interactions required for patterning the basal end of the single axis in Hydra which postulates that CnNK-2 together with pedibin orchestrates foot specific differentiation.