Developmental activation of the Drosophila alcohol dehydrogenase (Adh) distal promoter is controlled by the Adh adult enhancer (AAE). Within this 150 bp, complex enhancer is a small (12 bp) positive cis-acting element that is required for high levels of distal transcription in adult flies and ADH-expressing tissue culture cells. We previously reported that the steroid receptor superfamily member FTZ-F1 binds to this site. We have identified a second steroid receptor superfamily member, DHR39, which also binds to this site. DHR39 is expressed throughout development in transcripts of several sizes. In situ hybridization to embryos has shown that DHR39 RNA is found primarily in the central nervous system, and not in embryonic tissues that express ADH. FTZ-F1 RNA, however, shows temporal-specific patterns similar to those of the distal promoter. FTZ-F1 and DHR39 have identical amino acids in the 'P-box' of the DNA binding domain, suggesting that they have identical DNA recognition characteristics. By electrophoretic mobility shift analysis we show that a DHR39 fusion protein binds specifically to two FTZ-F1 binding sites. By over expressing the full length DHR39 protein in a transient co-transfection assay we have shown that it represses distal Adh expression in a dosage- and binding site-dependent manner. Over expression of an alternative DHR39 open reading frame that lacks part of the putative ligand binding domain does not alter Adh expression. In contrast, over expression of FTZ-F1 specifically activates distal Adh expression.