The agouti (a) locus acts within the microenvironment of the hair follicle to regulate coat color pigmentation in the mouse. We have characterized a gene encoding a novel 131 amino acid protein that we propose is the one gene associated with the agouti locus. This gene is normally expressed in a manner consistent with a locus function, and, more importantly, its structure and expression are affected by a number of representative alleles in the agouti dominance hierarchy. In addition, we found that the pleiotropic effects associated with the lethal yellow (Ay) mutation, which include pronounced obesity, diabetes, and the development of neoplasms, are accompanied by deregulated overexpression of the agouti gene in numerous tissues of the adult animal.