Members of the basic Helix-loop-Helix (bHLH) family of transcription factors, have been shown to regulate proliferation and differentiation of a variety of cell types. Cell type-specific bHLH proteins bind DNA as heterodiamers with the ubiquitous bHLH protein, E12, and activate expression of tissue-specific gene. We have used the yeast two-hybride system to screen cDNA libraries prepared from mouse embryos to identify novel cell type specific bHLH proteins that dimerize with E12 in vivo. This strategy has led to cloning of a novel bHLH protein named Dermo-1. The bHLH region of Dermo-1 shares extensive homology with members of the twist family of bHLH proteins, which are expressed in embryonic mesoderm. During mouse embryogenesis, dermo-1 is expressed at high levels in the dermis in a pattern that is distinct from previously characterized transcriptional regulators. The Dermo-1 protein binds the E-box consensus sequence in the presence of E12. This expression pattern and DNA binding activity suggest that Dermo-1 is a regulator of gene expression in developing dermis. Our overall goal is to determine the faction of Dermo-1 by targeted inactivation of this gene in transgenic mice and to characterize the effects of inactivation of skin development. Specific aims are: (1) To target the Dermo-1 gene in embryonic stem cells and to use these cells to create Dermo-1-null mice. (2) To analyze dermal development in Dermo-1-null mice using a variety of molecular markers. (3) To determine whether Dermo-1 and Twist have overlapping function in dermal development by intercrossing mice heterozygous for null mutations in both genes. (4) To investigate the mechanism where by Dermo 1 antagonizes the activities of myogenic bHLH proteins and to determine whether there is a mutual exclusivity between the muscle and dermal developmental programs. There studies will contribute to an understanding of the basic mechanisms involved in skin development and may ultimately lead to identification of novel targets for treatment of skin diseases.