DNA-binding proteins are important for regulating gene expression during development. It is widely assumed that this regulation involves sequence-specific DNA binding by these transcription factors to cognate cis-regulatory sequences of their downstream target genes. However, studies in both the Drosophila and the mouse model systems have provided examples in which the DNA-binding activity of a transcription factor is not essential for in vivo function. Using a system that allows for quantitative analysis of gene function in the Drosophila embryo, we have discovered a DNA-binding-independent activity of Runt, the founding member of the RUNX family of transcriptional regulators. Examination of the in vivo potency of a DNA-binding-defective form of Runt reveals differential requirements for DNA binding in the regulation of different downstream target genes. DNA binding is not required for establishing repression of the odd-numbered stripes of the segment polarity gene engrailed, but does contribute to Runt's role as a regulator of sloppy-paired, another downstream target gene in the pathway of segmentation. We investigate this DNA-binding-independent pathway using a genetic screen for dose-dependent modifiers of runt activity. These studies reveal that DNA-binding proteins encoded by the tramtrack locus cooperate with Runt to repress engrailed. These results provide new insights into the context-dependent regulatory functions of Runt domain proteins and provide a paradigm for understanding DNA-binding-independent regulation by developmentally important transcription factors.