In Drosophila, the homeotic genes encode transcription factors which control segment identity during embryogenesis by specifying the appropriate set of 'target' genes necessary to produce the individual segmental characteristics. Though we know much about the homeotic genes and the proteins they encode, we know little of their targets. Here we identify and characterize one such target gene, a gene activated by the product of the homeotic gene Deformed. DNA binding assays and expression of reporter gene constructs indicate that activation of this gene requires a direct interaction between the Deformed protein and an upstream enhancer element at this target gene. However, although Deformed is required to activate this gene in cells of the maxillary segment, ectopically expressed Deformed does not activate the gene in other regions of the embryo. We conclude from this and other observations that additional factors may be required to activate the target gene, and, therefore, Deformed may participate in either a combinatorial or hierarchical activation signal in the maxillary cells. This newly identified gene encodes a novel protein of unknown function, though proteins with similar amino acid composition have been found. The pattern of transcript accumulation during embryogenesis indicates that this gene may be regulated by other homeoproteins in addition to Deformed.