We have identified a zebrafish homologue of the human E12 protein, which we have called ZFE12. It shows a high degree of identity to HE12 throughout its entire sequence, particularly in the bHLH domain (93%); amino acid sequence identity of the bHLH domain of ZFE12 to Drosophila DAUGHTERLESS is also very high (75%). During early embryogenesis, expression of ZfE12 is widespread. Following gastrulation, ZfE12 transcripts can be detected in all embryonic tissues with the exception of the notochord, although zones with relatively higher densities of transcripts are present in the developing brain and in the somites. To assay biological activities associated with the ZFE12 protein, two P-element constructs were made, each carrying a Drosophila daughterless gene that had been modified by replacing either the HLH domain or the entire C-terminus including the bHLH domain, by the equivalent domains of ZfE12. These constructs were used to transform flies and tested for their ability to rescue the daughterless mutant phenotype. Complete rescue of the neural phenotype and of the embryonic lethality was obtained. However, the daughterless function could not be completely restored. Although fertile flies transheterozygous for a hypomorphic and an amorphic mutation and carrying the construct encoding the zebrafish HLH domain emerged, they lacked various types of sensory organs on head and thorax and showed slight wing defects. Mutants carrying the second construct occasionally reached pupal stages but died subsequently. These data demonstrate that the HLH domain of ZFE12 can carry out most, but not all, functions performed by the corresponding region of the DAUGHTERLESS protein in Drosophila.