The A mating-type locus of the mushroom Coprinus cinereus contains three or more paralogous pairs of genes encoding two families of homeodomain proteins (HD1 and HD2). A successful mating brings together different allelic forms of at least one gene, and this is sufficient to trigger initial steps in sexual development. Previous studies have suggested that development is regulated by heterodimerization between HD1 and HD2 proteins. In this report, we describe 5[prime] gene deletions and 5[prime] end exchanges showing that the N-terminal regions of the proteins are essential for choosing a compatible partner but not for regulating gene transcription. Using an in vitro glutathione S-transferase association assay, we demonstrated heterodimerization between HD1 and HD2 proteins and found that heterodimerization only occurs between compatible protein combinations. The N-terminal regions of the proteins were sufficient to mediate dimerization, and N-terminal swaps resulted in a predicted change in dimerization specificity. By analyzing the N-terminal amino acid sequences of HD1 proteins, we identified two potential coiled-coil motifs whose relative positions vary in paralogous proteins but are both required for in vivo function.