The maize dehydration-responsive element (DRE)-binding factor, DBF1, is a member of the Apetala 2/Ethylene Response Factor transcription factors family and is involved in the regulation of the ABA-responsive gene rab17 through the DRE in an ABA-dependent pathway. In this study we analysed the functionality of DBF1 in abiotic stress responses and found that Arabidopsis plants over-expressing DBF1 were more tolerant to osmotic stress than control plants. In yeast two-hybrid analyses, DBF1 interacted with DBF1-interactor protein 1 (DIP1), a protein containing a conserved R3H single-strand DNA-binding domain. Subcellular localization of DIP1 showed that the protein fusion DIP1-Red Flourescent Protein (RFP) was mainly localized in the cytoplasm. However, after co-transformation of DBF1-GFP and DIP1-RFP, both proteins co-localized in the nucleus. Interestingly, when the N-terminal DBF1-GFP was co-expressed with DIP1-RFP, both proteins co-localized predominantly in the cytoplasmic speckles observed for N-terminal DBF1-GFP fusion protein. These results clearly show in vivo interaction of DBF1 with DIP1 in the cell and that this interaction is necessary for the nuclear localization of DIP1 protein. Analysis of the regulatory effect of the DBF1 and DIP1 interaction on the maize rab17 promoter activity indicated that co-transfection of DBF1 with DIP1 enhances promoter activity in the absence of ABA treatment. We suggest that the regulated association of DBF1 and DIP1 may control the levels of target gene expression during stress conditions.