The A mating type-genes of the mushroom, Coprinus cinereus, encode two classes of homeodomain-containing proteins distinguished as HD1 and HD2 on the basis of conserved, but distinctly different motifs. Compatible mating partners bring together versions of the proteins that can heterodimerize, thereby generating an active transcription factor complex that commits mated cells to sexual development. We have previously described a rare mutation in which an HD2::HD1 gene fusion generates a 'fused dimer' lacking much of HD1 including the homeodomain yet capable of constitutively promoting development [Kües et al., EMBO J. 13 (1994b) 4054-4059]. Here, we exploit this mutation to help identify contributions made by each protein class to normal heterodimer function. We show that the HD2 homeodomain is essential; deletion within the HD1 homeodomain can be tolerated in a normal heterodimer, as well as in the mutant fusion protein, but not substitution of a critical amino acid. We define, by deletion analysis, an essential C-terminal region of the HD1 and demonstrate its potential activation function by the ability to activate transcription in yeast when fused to the GAL4 DNA-binding domain. We also identify a potential role in transcriptional repression for the predicted C-terminal helix of HD1 proteins.