Insulin-like growth factor binding protein (IGFBP)-5 is a secreted protein that binds to IGF and modulates IGF actions. IGFBP-5 is also found in the nucleus of mammalian cells and has transactivation activity. The structural basis of this transactivation activity and its role in mediating IGF-independent actions are not clear. Here we report that there are 2 igfbp-5 genes in zebrafish and other teleost fish. In zebrafish, igfbp-5a and -5b are expressed in spatially restricted, mostly nonoverlapping domains during early development. The IGF binding site is conserved in both zebrafish IGFBP-5s, and they are both secreted and capable of IGF binding. Both proteins contain a consensus bipartite nuclear localization signal and were found in the nucleus when introduced into cultured cells. Although zebrafish IGFBP-5b possesses transactivation activity, zebrafish IGFBP-5a lacks this activity. Mutational analysis demonstrated that 2 unique amino acids in positions 22 and 56 of IGFBP-5a are responsible for its lack of transactivation activity. These findings suggest that the duplicated zebrafish IGFBP-5s have evolved divergent regulatory mechanisms and distinct biological properties by partitioning of ancestral structural domains and provide new evidence for a conserved role of the IGF binding, nuclear localization, and transactivation domain of this multifunctional IGFBP.