The Lhx9 LIM-homeodomain transcription factor and its truncated isoform Lhx9alpha are generated by alternative splicing of the Lhx9 gene. Here we investigated the differential functional properties of these two isoforms. Lhx9alpha, which lacks parts of the homeodomain, was unable to bind DNA in EMSA experiments, but was able to associate with CLIM cofactors in GST pull-down assays. In transfection experiments in PC12 cells, Lhx9alpha fusion constructs systematically showed a nuclear localization, as opposed to Lhx9 fusion constructs, which also localized to the cytoplasm. Moreover, Lhx9 increased NGF-induced neuronal differentiation of PC12 cells. Lhx9alpha, on the other hand, did not significantly increase neuronal differentiation but had an effect on the morphology of PC12 cells. Finally, as tested by RT-PCR experiments on transfected PC12 cells, Lhx9 was not able to induce the transcription of Lhx9alpha. Our results show significantly different functional properties for Lhx9 and Lhx9alpha, and suggest that Lhx9alpha can compete away limiting amounts of nuclear CLIM cofactors. Thus, Lhx9 and Lhx9alpha isoforms could be implicated in regulating various aspects of neuronal differentiation.