The development of distinct cell lineages from unspecified precursors is the result of complex interactions between cell-extrinsic cues and the crucial programs of gene expression. To study such interactions, we are focusing on the development of neural crest-derived and optic neuroepithelium-derived pigment cells. This choice is based on the facts that pigment cells are critical for the development and function of the inner ear and eye, can easily be visualized in vivo and manipulated in culture, and are disturbed in their development by a number of discrete mutations. Specifically, we are focusing on the role and regulation of a critical pigment cell transcription factor, MITF, whose mutations in humans are associated with congenital deafness. Previous results suggest that the functions of MITF in different tissues are mediated by distinct isoforms and that the expression and activity of these isoforms are regulated by extracellular signaling. To elucidate transcriptional mechanisms and probe the biological roles of isoforms, we are generating mice with selective targeted mutations in two eye-specific MITF promoters and are characterizing these promoters and their binding sites for eye-relevant transcriptional regulators by a number of in vitro techniques such as chromatin immunoprecipitation and EMSA assays. Previous in vitro results also showed that extracellular MAP kinase-mediated phosphorylation of MITF modulates MITF activity by increasing its transcriptional activity while at the same time decreasing its stability. To probe the in vivo relevance of these findings, we generated mice with a targeted mutation in the codon encoding a critical phosphorylatable serine. The analysis of these mice led to the intriguing observation that normally this codon not only encodes a serine but is also part of a sequence controlling the incorporation of the entire exon containing the respective serine. We, therefore, plan to characterize the biological role of MITF with or without this exon and to determine whether its incorporation or elimination is normally regulated in a temporal or spatial fashion during development. Taken together, these approaches will help us to understand how extracellular signaling is coupled with transcriptional regulation during development of two model lineages which are instrumental for mammalian sensory organ development and function.