Hox transcription factors specify body segments along the anteroposterior axis of the embryo. Despite conservation of the homeodomain (HD), different Hox paralogs instruct remarkably different developmental fates. We have unexpectedly found that the Drosophila Sex combs reduced (Scr) protein dimerizes in vivo via the homeodomain, whereas its closest relative, Antennapedia (Antp), does not. Dimerization requires the conserved residue 19 in the ELEKEF motif of the HD and is facilitated by DNA binding. To study Scr dimerization in vivo, we generate a giant transcriptional puff in live salivary gland cells, consisting of a controllable multiple Scr-binding site of the fork head enhancer, and visualize Scr dimer formation upon specific DNA binding. Scr dimerization is required not only for transcriptional activation of the fork head gene but also for Scr homeotic function in the fly (formation of ectopic salivary glands, posterior transformations in the embryo and antenna-to-tarsus transformations). Finally, we attempt to attribute the differential behavior in dimer formation observed between Antp and Scr to diverse amino acid regions between the two proteins that account for dimerization in Scr versus non-dimerization in Antp. By constructing hybrid Antp proteins, we find that the C terminus and linker region between the YPWM motif and the HD of Scr are independently sufficient to confer dimer formation in Antp, whereas the long N terminus of the protein and the HD are largely dispensable. Our results indicate that Scr functions as a homodimer to increase its transcriptional specificity and suggest that the formation of HD homo- or heterodimers might underlie the functional distinction between very similar HD proteins in vivo.