Zic family genes encode zinc finger proteins, which play important roles in vertebrate development. The zinc finger domains are highly conserved between Zic proteins and show a notable homology to those of Gli family proteins. In this study, we investigated the functional properties of Zic proteins and their relationship to the GLI proteins. We first established an optimal binding sequence for Zic1, Zic2, and Zic3 proteins by electrophoretic mobility shift assay-based target selection and mutational analysis. The selected sequence was almost identical to the GLI binding sequence. However, the binding affinity was lower than that of GLI. Consistent results were obtained in reporter assays, in which transcriptional activation by Zic proteins was less dependent on the GLI binding sequence than GLI1. Moreover, Zic proteins activated a wide range of promoters irrespective of the presence of a GLI binding sequence. When Zic and GLI proteins were cotransfected into cultured cells, Zic proteins enhanced or suppressed sequence-dependent, GLI-mediated transactivation depending on cell type. Taken together, these results suggest that Zic proteins may act as transcriptional coactivators and that their function may be modulated by the GLI proteins and possibly by other cell type-specific cofactors.