Pax-1 encodes for a DNA-binding transcriptional activator that was originally discovered in murine embryos using a probe from the Drosophila paired-box-containing gene, gooseberry-distal. We have cloned the avian Pax-1 gene as a basis for experimental studies of the induction of Pax-1 in the paraxial mesoderm. The amino acid sequence of the paired-domain is exactly the same in the quail and mouse, whereas outside the paired-domain there is 61% homology. Starting at about the eight-somite stage, quail Pax-1 is expressed in the paraxial mesoderm in a craniocaudal sequence. The unsegmented paraxial mesoderm and the two most recently formed somites do not express Pax-1. In the epithelial somite, the somitocoele cells and the cells of the ventral two-thirds of the epithelial wall are positive. As soon as the sclerotome is formed, only a subset of sclerotome cells expresses Pax-1. These are the cells that migrate towards the notochord to form the perinotochordal tube. Expression then becomes restricted to the intervertebral discs, the perichondrium of the vertebral bodies and the connective tissue surrounding the spinal ganglia. Additional expression domains are found in the scapula and the pelvic region, distinct areas of the head, and the epithelium of the second to the fourth visceral pouch. In later stages the thymus is positive. In vitro and in vivo experiments show that the notochord induces Pax-1 in the paraxial mesoderm, but limb bud mesoderm is not competent to respond to notochordal signals. Floor plate is also capable of inducing Pax-1 expression in sclerotome cells. Our studies show that in competent cells of the paraxial mesoderm, Pax-1 is a mediator of signals emanating from the notochord and the floor plate.