Three distinct hepatocyte nuclear factor 3 (HNF-3) proteins (HNF-3 alpha, -3 beta, and -3 gamma) are known to regulate the transcription of liver-specific genes. The HNF-3 proteins bind to DNA as a monomer through a modified helix-turn-helix, known as the winged helix motif, which is also utilized by a number of developmental regulators, including the Drosophila homeotic forkhead (fkh) protein. We have previously described the isolation, from rodent tissue, of an extensive family of tissue-specific HNF-3/fkh homolog (HFH) genes sharing homology in their winged helix motifs. In this report, we have determined the preferred DNA-binding consensus sequence for the HNF-3 beta protein as well as for two divergent family members, HFH-1 and HFH-2. We show that these HNF-3/fkh proteins bind to distinct DNA sites and that the specificity of protein recognition is dependent on subtle nucleotide alterations in the site. The HNF-3, HFH-1, and HFH-2 consensus binding sequences were also used to search DNA regulatory regions to identify potential target genes. Furthermore, an analysis of the DNA-binding properties of a series of HFH-1/HNF-3 beta protein chimeras has allowed us to identify a 20-amino-acid region, located adjacent to the DNA recognition helix, which contributes to DNA-binding specificity. These sequences are not involved in base-specific contacts and include residues which diverge within the HNF-3/fkh family. Replacement of this 20-amino-acid region in HNF-3 beta with corresponding residues from HFH-1 enabled the HNF-3 beta recognition helix to bind only HFH-1-specific DNA-binding sites. We propose a model in which this 20-amino-acid flanking region influences the DNA-binding properties of the recognition helix.