The Drosophila EXD protein and its mammalian counterparts, the PBX proteins, have been proposed to function in HOX target selectivity. Here we show that exd function is required for the autoactivation phase of Dfd expression in the posterior head. Mutations that change the affinity of a small autoactivation element for EXD protein result in corresponding changes in the element's embryonic activity. Our data suggest that the EXD and DFD proteins directly activate this element in maxillary cells without cooperatively binding to a specialized heterodimer binding site. Based on the types of homeotic transformations and changes in gene expression observed in exd mutant embryos, we propose a new model for EXD/PBX action in which these proteins are required for HOX protein transcriptional activation functions, but dispensable for HOX transcriptional repression functions. Although the selection of a specific target gene by a HOX protein versus another may be explained in some cases by the selective modulation of HOX binding specificity by EXD, we favor the idea that EXD interacts in a more general sense with most HOX proteins to switch them into a state where they are capable of transcriptional activation.