The Drosophila single-minded and trachealess bHLH-PAS genes control transcription and development of the CNS midline cell lineage and tracheal tubules, respectively. We show that Single-minded and Trachealess activate transcription by forming dimers with the Drosophila Tango protein that is an orthologue of the mammalian Arnt protein. Both cell culture and in vivo studies show that a DNA enhancer element acts as a binding site for both Single- minded::Tango and Trachealess::Tango heterodimers and functions in controlling CNS midline and tracheal transcription. Isolation and analysis of tango mutants reveal CNS midline and tracheal defects, and gene dosage studies demonstrate in vivo interactions between single- minded::tango and trachealess::tango . These experiments support the existence of an evolutionarily conserved, functionally diverse bHLH-PAS protein regulatory system.