Bicoid (BCD), the anterior determinant of Drosophila, controls embryonic gene expression by transcriptional activation and translational repression. Both functions require the homeodomain (HD), which recognizes DNA motifs at target gene enhancers and a specific sequence interval in the 3' untranslated region of caudal (cad) mRNA. Here we show that the BCD HD is a nucleic acid-binding unit. Its helix III contains an arginine-rich motif (ARM), similar to the RNA-binding domain of the HIV-1 protein REV, needed for both RNA and DNA recognition. Replacement of arginine 54, within this motif, alters the RNA but not the DNA binding properties of the HD. Corresponding BCD mutants fail to repress cad mRNA translation, whereas the transcriptional target genes are still activated.