The MutL protein is an essential component of the Escherichia coli methyl-directed mismatch repair system but has no known enzymatic function. In the yeast Saccharomyces cerevisiae, the MutL equivalent, an Mlh1p and Pms1p heterodimer, interacts with Msh2p bound to mismatch-containing DNA. Little is known of the functional domains of Mlh1p and Pms1p. In this report, we define the Mlh1p and Pms1p domains required for Mlh1p-Pms1p interaction. The Mlh1p-interactive domain of Pms1p is comprised of 260 amino acids near the carboxyl terminus while the Pms1p-interactive domain of Mlh1p resides in the final 212 residues. The two domains are sufficient for Mlh1p-Pms1p interaction, as determined by the two-hybrid assay and by in vitro protein affinity chromatography. Deletions within the domains completely eliminated Mlh1p-Pms1p interaction. Using site-directed mutagenesis, we altered a number of highly conserved residues in the Mlh1p and Pms1p proteins, including some alterations that mimic germline mutations observed for human hereditary nonpolyposis colorectal cancer. Alterations either in the consensus MutL box located in the amino-terminal portion of each protein or in the carboxyl-terminal homology motif of Mlh1p eliminated DNA mismatch repair function but had no effect on Mlh1p-Pms1p interaction. In addition, certain MLH1 and PMS1 mutant alleles caused a dominant negative mutator effect when overexpressed. We discuss the implications of these findings for the structural organization of the Mlh1p and Pms1p proteins and the importance of Mlh1p-Pms1p interaction.