Tissue-specific expression of the alpha-subunit gene of glycoprotein hormones involves an enhancer element designated the pituitary glycoprotein basal element, which interacts with the LIM homeodomain transcription factor, Lhx2. In the present studies we have explored the function of the LIM domain of Lhx2 in stimulating alpha-subunit transcription. When fused to the GAL4 DNA-binding domain, the LIM domain of Lhx2 was shown to contain a transcriptional activation domain. Furthermore, in the context of an alpha-subunit reporter gene in which a GAL4-binding site replaced the pituitary glycoprotein basal element, the LIM domain enhanced both basal and Ras-mediated transcription. In addition, a synergistic response to Ras activation was observed when the Lhx2 LIM domain and the transactivation domain of Elk1 are directed to a minimal reporter gene. A yeast two-hybrid screen identified the recently described melanocyte-specific gene-related gene 1 (MRG1) as an Lhx2 LIM-interacting protein. MRG1 was shown to bind Lhx2 in vitro, and a co-immunoprecipitation assay provided evidence that endogenous MRG1 forms a complex with Lhx2 in alphaT3-1 cells. Expression of MRG1 in alphaT3-1 cells enhanced alpha-subunit reporter gene activity. MRG1 was also shown to bind in vitro to the TATA-binding protein and the transcriptional coactivator, p300. These data suggest a model in which the Lhx2 LIM domain activates transcription through interaction with MRG1 leading to recruitment of p300/CBP and the TATA-binding protein.