Pancreatic and duodenal homeobox 1 (Pdx1) is a homeodomain transcription factor belonging to the ParaHox family. Pdx1 plays an essential role in pancreatic endocrine and exocrine cell development and maintenance of adult islet beta-cell function. Mutations in the human pdx1 gene are linked to an early onset form of non-insulin-dependent diabetes mellitus, MODY-4. We demonstrate that the homeodomain reproduces the binding specificity of the full-length protein. We report the 2.4 A resolution crystal structure of the homeodomain bound to a target DNA. The two Pdx1/DNA complexes in the asymmetric unit display conformational differences: in the DNA curvature, the orientation of the homeodomain in the major groove, and the order of the N-terminal arm. Comparing the two complexes indicates invariant protein-DNA contacts, and variant contacts that are unique to each binding orientation. An induced fit model is proposed that depends on the DNA conformation and provides a mechanism for nonlocal contributions to binding specificity.