Mice with mutations at the downless (dl) locus have defects in hair follicle, tooth, sweat gland, preputial gland, Meibomian gland, and tail development. The dl phenotype is analogous to the human genetic disorder termed autosomal hypohidrotic (or anhidrotic) ectodermal dysplasia (HED). On the basis of the identification of two related transgenic insertional mutations in the downless gene, yeast artificial chromosomes (YACs) were identified that map to the critical region of mouse Chromosome (Chr) 10. To determine which of the YACs contain the dl gene, we generated YAC transgenic mice by mouse embryo microinjections. The 200-kb YAC B25.D9 was found to rescue all of the downless defects. In addition, the transgenic YAC rescued the dominant Sleek (Dlslk) allele. Since the sequences within the YAC are entirely deleted in one of the transgenic mutants, our results establish that Sleek encodes a dominant-negative protein whose effects can be reversed by expression of extra copies of the wild-type locus.