The mouse microphthalmia (mi) locus encodes a basic helix-loop-helix-leucine zipper (bHLH-Zip) transcription factor called MITF (microphthalmia transcription factor). Mutations at mi affect the development of several different cell types, including melanocytes, mast cells, osteoclasts and pigmented epithelial cells of the eye. Here we describe the phenotypic and molecular characterization of the semidominant Microphthalmia(brwnish) (Mi(b)) mutation. We show that this mutation primarily affects melanocytes and produces retinal degeneration. The mutation is a G to A transition leading to a Gly244Glu substitution in helix 2 of the HLH dimerization domain. This location is surprising since other semidominant mi mutations characterized to date have been shown to affect DNA binding or transcriptional activation domains of MITF and act as dominant negatives, while mutations that affect MITF dimerization are inherited recessively. Gel retardation assays showed that while the mutant MITF(Mi-b) protein retains its dimerization potential, it is defective in its ability to bind DNA. Computer modeling suggested that the Gly244Glu mutation might disrupt DNA binding by interfering with productive docking of the protein dimer onto DNA. The Mi(b) mutation therefore appears to dissociate a DNA recognition function of the HLH domain from its role in protein dimerization.