Members of the mammalian AP-2 transcription factor family have critical regulatory roles in many aspects of development and are also implicated in cancer progression. Four AP-2 genes have been previously characterized in mouse and human, encoding the AP-2alpha, AP-2beta, AP-2gamma, and AP-2delta proteins. Here we report the cloning and characterization of the fifth member of the vertebrate AP-2 family, AP-2epsilon. The AP-2epsilon protein is very similar to the other family members in its DNA binding and dimerization domain and also contains conserved proline and aromatic amino acid residues in the activation domain. Consistent with these observations, AP-2epsilon can bind to the GC-rich AP-2 consensus sequence and can dimerize either with itself or with any of the other AP-2 proteins. The AP-2epsilon protein is also able to activate transcription in a binding site-dependent manner. However, the mouse AP-2epsilon gene is distinctive from the other AP-2 genes in its pattern of expression during embryogenesis. Unlike AP-2alpha, AP-2beta, and AP-2gamma, transcripts corresponding to AP-2epsilon are not found in the neural crest and its derivatives. Instead, AP-2epsilon is expressed most prominently in the mitral cell layer of the developing olfactory bulb. A comparison of AP-2 gene family expression in the olfactory system suggests both distinct and overlapping functions for these transcription factors in forebrain development.