Pax genes encode for transcription factors essential for tissue development in many species. Pax8, the only member of the family expressed in the thyroid tissue, is involved in the morphogenesis of the gland and in the transcriptional regulation of thyroid-specific genes. TTF-1, a homeodomain-containing factor, is also expressed in the thyroid tissue and has been demonstrated to play a role in thyroid-specific gene expression. Despite the presence of Pax8 and TTF-1 also in a few other tissues, the simultaneous expression of the two transcription factors occurs only in the thyroid, supporting the idea that Pax8 and TTF-1 might cooperate to influence thyroid-specific gene expression. In this report, we describe a physical and functional interaction between these two factors. The fusion protein GST-Pax8 is able to bind TTF-1 present in thyroid or in non-thyroid cell extracts, and by using bacterial purified TTF-1 we demonstrate that the interaction is direct. By co-immunoprecipitation, we also show that the interaction between the two proteins occurs in vivo in thyroid cells. Moreover, Pax8 and TTF-1 when co-expressed in HeLa cells synergistically activate Tg gene transcription. The synergism requires the N-terminal activation domain of TTF-1, and deletions of Pax8 indicate that the C-terminal domain of the protein is involved. Our results demonstrate a functional cooperation and a physical interaction between transcription factors of the homeodomain-containing and of the paired domain-containing gene families in the regulation of tissue-specific gene expression.