The COOH-terminal transactivation domain plays a key role in regulating the in vitro and in vivo function of Pax3 homeodomain.

Efficient transcription activation by Pax3 requires binding to a complex DNA sequence element containing binding sites for both the paired domain and the Prd type homeodomain. Previously, we have shown that this requirement is lost in PAX3-FKHR, the product of a t(2;13) chromosomal translocation associated with alveolar rhabdomyosarcoma. In contrast to Pax3, the chimeric PAX3-FKHR, which acts as an oncogene, can efficiently activate a DNA sequence element containing only a homeodomain binding site (TAATAN(2-3)ATTA), despite the presence of an intact Pax3 paired domain. Here, we showed that this alteration in sequence-specific transcription activity was determined in part by the transactivation domain. First, we demonstrated that in intact Pax3, substitution of the Pax3 transactivation domain with an unrelated viral VP16 transactivation domain enabled Pax3 to transactivate homeodomain-specific DNA sequence, as well as to transform fibroblasts. Furthermore, we could abolish the homeodomain-dependent transcription and transforming activities of PAX3-FKHR by replacing its FKHR transactivation domain with Pax3 transactivation domain. Collectively, these results suggested that the transactivation domain influences the DNA binding specificity of Pax3. The translocation process increased the oncogenic potential of Pax3 by removing the inhibitory action of Pax3 transactivation domain on its homeodomain.