We have used the yeast two-hybrid system to identify proteins that interact with the N-terminal region of c-Jun, which is known to be involved in regulatory interactions. One of the proteins identified is the homeodomain-containing protein Hex. The Hex homeodomain is sufficient for interaction; moreover, the homeodomains of several other transcription factors also interact. Mutations within helix III of the Hex homeodomain greatly reduce the interaction. In vitro, c-Jun/c-Fos, JunB/c-Fos, and JunD/c-Fos all interact with the Hex homeodomain more strongly than the respective Jun proteins (or c-Fos) alone, suggesting that heterodimerization exposes reactive regions in the N termini of the Jun proteins. In transfected cells, Hex expression inhibits Jun- or Jun/c-Fos-dependent transcription of a reporter gene; the presence of Hex-binding sites in the promoter enhances the inhibitory effect. Jun-dependent activation of transcription from the basic fibroblast growth factor gene, previously shown to be regulated by both Jun and homeodomain proteins, was also dramatically reduced by Hex expression. Furthermore, in contrast to the reduction of Jun-mediated transcription by Hex, we found that expression of the Drosophila ultrabithorax gene enhanced c-Jun-dependent transcription. We conclude that the functional interaction between members of the Jun and homeodomain families of transcription factors could play a critical role in regulating developmental and differentiation programs.