Mouse models show that congenital neural tube defects (NTDs) can occur as a result of mutations in the platelet-derived growth factor receptor-alpha gene (PDGFRalpha). Mice heterozygous for the PDGFRalpha-mutation Patch, and at the same time homozygous for the undulated mutation in the Pax1 gene, exhibit a high incidence of lumbar spina bifida occulta, suggesting a functional relation between PDGFRalpha and Pax1. Using the human PDGFRalpha promoter linked to a luciferase reporter, we show in the present paper that Pax1 acts as a transcriptional activator of the PDGFRalpha gene in differentiated Tera-2 human embryonal carcinoma cells. Two mutant Pax1 proteins carrying either the undulated-mutation or the Gln --> His mutation previously identified by us in the PAX1 gene of a patient with spina bifida, were not or less effective, respectively. Surprisingly, Pax1 mutant proteins appear to have opposing transcriptional activities in undifferentiated Tera-2 cells as well as in the U-2 OS osteosarcoma cell line. In these cells, the mutant Pax1 proteins enhance PDGFRalpha-promoter activity whereas the wild-type protein does not. The apparent up-regulation of PDGFRalpha expression in these cells clearly demonstrates a gain-of-function phenomenon associated with mutations in Pax genes. The altered transcriptional activation properties correlate with altered protein-DNA interaction in band-shift assays. Our data provide additional evidence that mutations in Pax1 can act as a risk factor for NTDs and suggest that the PDGFRalpha gene is a direct target of Pax1. In addition, the results support the hypothesis that deregulated PDGFRalpha expression may be causally related to NTDs.