ABSTRACT In vertebrates, transcriptional control of skeletal muscle genes during differentiation is regulated by enhancers that direct the combinatorial binding and/or interaction of MEF2 and the bHLH MyoD family of myogenic factors. We have shown that Drosophila MEF2 plays a role similar to its vertebrate counterpart in the regulation of the Tropomyosin I gene in the development of Drosophila somatic muscles, however, unlike vertebrates, Drosophila MEF2 interacts with a muscle activator region that does not have binding sites for myogenic bHLH-like factors or any other known Drosophila transcription factors. We describe here the isolation and characterization of a component of the muscle activator region that we have named PDP1 (PAR domain protein 1). PDP1 is a novel transcription factor that is highly homologous to the PAR subfamily of mammalian bZIP transcription factors HLF, DBP and VBP/TEF. This is the first member of the PAR subfamily of bZIP transcription factors to be identified in Drosophila. We show that PDP1 is involved in regulating expression of the Tropomyosin I gene in somatic body-wall and pharyngeal muscles by binding to DNA sequences within the muscle activator that are required for activator function. Mutations that eliminate PDP1 binding eliminate muscle activator function and severely reduce expression of a muscle activator plus MEF2 mini-enhancer. These and previous results suggest that PDP1 may function as part of a larger protein/DNA complex that interacts with MEF2 to regulate transcription of Drosophila muscle genes. Furthermore, in addition to being expressed in the mesoderm that gives rise to the somatic muscles, PDP1 is also expressed in the mesodermal fat body, the developing midgut endoderm, the hindgut and Malpighian tubules, and the epidermis and central nervous system, suggesting that PDP1 is also involved in the terminal differentiation of these tissues.