The segmentation genes runt and hairy are required for the proper transcriptional regulation of the pair-rule gene fushi tarazu during the blastoderm stage of Drosophila embryogenesis. The expression of different fushi tarazu reporter genes was examined in runt and hairy mutant embryos, as well as in runt over-expressing embryos in order to identify DNA elements responsible for mediating these regulatory effects. The results indicated that runt and hairy act through a common 32 base-pair element. This element, designated as fDE1, contains a binding site for a small family of orphan nuclear receptor proteins that are uniformly expressed in blastoderm embryos. The pair-rule expression of reporter gene constructs containing multimerized fDE1 elements depends on activation by runt and repression by hairy. Examination of reporter genes with mutated fDE1 elements provided further evidence that this element mediates both transcriptional activation and repression. Genetic experiments indicated that the opposing effects of runt and hairy were not due solely to cross-regulatory interactions between these two genes and that fDE1-dependent expression is regulated by factors in addition to runt and hairy.