One often-noted feature of homeobox genes is the conservation of the homeodomain among orthologous genes from distantly related species. This sequence conservation is presumed to reflect functional conservation, which indeed has been demonstrated in several cases. We analyzed the evolution of an orphan homeobox gene, Pem, which is expressed preferentially in male and female reproductive tissue. Sequence analysis of 12 species of mice and rats indicated that the Pem gene has evolved at a remarkably high rate. The most rapidly evolving region of the Pem protein is the amino portion of the homeodomain, including the flexible N-terminal arm, helices I and II, and the linker regions between the helices. In contrast, the third helix, which is known to mediate base-specific DNA contacts in other homeodomains, is conserved in the Pem protein. Analysis of the ratio of nonsynonymous and synonymous codon substitution rates within the Pem homeodomain suggested that its divergence was driven by adaptive selection. The rate of nonsynonymous substitutions in Pem was higher than that of the sex-determination gene Sry, which also appears to have undergone directional selection over a short evolutionary period. Despite the rapid evolution of the Pem gene, we detected no Pem polymorphisms and observed no variation in the homeobox sequence among closely related Mus species. This suggests that purifying episodes followed phases in which selection pressure drove the rapid divergence of this locus. We propose that transcription factors that function in reproductive events can be subject to rapid adaptive selection.