Caudal-related homeobox transcription factors are involved in the definition of the anteroposterior axis and intestinal development. Recent reports indicate that dysregulation of CDX1 and CDX2, the human homologues of Drosophila caudal, are associated with several types of cancer. Very little is known, however, about the regulatory mechanisms that direct the caudal-related homeobox gene expression. In this study, we have identified the binding sites for bHLH-PAS proteins, referred to as CNS midline element (CME), in the 5'-flanking region of the Drosophila caudal gene. Analyses using transgenic flies carrying a caudal-lacZ fusion gene bearing a wild-type or mutant CME indicate that the CME sites are required for caudal gene expression in vivo. We also determined that the caudal promoter activity can be regulated by Trachealess (Trh)/Tango (Tgo) bHLH-PAS proteins, via the CME sites. Our results suggest that the Drosophila caudal gene is a target of the Trh/Tgo bHLH-PAS proteins.