Nanog is a newly identified homeodomain gene that functions to sustain the pluripotency of embryonic stem cells. However, the molecular mechanism through which nanog regulates stem cell pluripotency remains unknown. Mouse nanog encodes a polypeptide of 305 residues with a divergent homeodomain similar to those in the NK-2 family. The rest of nanog contains no apparent homology to any known proteins characterized so far. It is hypothesized that nanog encodes a transcription factor that regulates stem cell pluripotency by switching on or off target genes. To test this hypothesis, we constructed fusion proteins between nanog and DNA binding domains of the yeast transcription factor Gal4 and tested the transactivation potentials of these constructs. Our data demonstrate that both regions N- and C- terminal to the homeodomain have transcription activities. Despite the fact that it contains no apparent transactivation motifs, the C-terminal domain is about 7 times as active as the N-terminal one. This unique arrangement of dual transactivators may confer nanog the flexibility and specificity to regulate downstream genes critical for both pluripotency and differentiation of stem cells.