The aryl hydrocarbon receptor (AHR) is a ligand-activated transcription factor that binds DNA in the form of a heterodimer with the AHR nuclear translocator protein (ARNT). Both proteins possess basic helix-loop-helix motifs. ARNT binds to the side of the xenobiotic responsive element (XRE) that resembles an E-box (the sequence recognized by the majority of other basic helix-loop-helix proteins), whereas AHR binds to the side of the XRE that does not conform to the E-box sequence. The basic region of ARNT closely resembles those of other E-box-binding proteins, whereas the "nominal basic region" of AHR (amino acids 27 39), although required for XRE binding, deviates from this consensus. By extensive mutational analysis it is shown here that an additional block of amino acids of AHR (from tyrosine 9 to lysine 20) that contains a highly basic segment is required for XRE binding and transcriptional activation. Deletion of the first nine amino acids negates XRE binding. Substitution of either tyrosine 9 or arginine 14 with alanine eliminates XRE binding, whereas alanine substitutions at certain other sites within the block reduce but do not eliminate binding. The reported absence of the first nine amino acids in the purified protein may therefore be artifactual. These results suggest that the amino acids of AHR involved in binding to the XRE constitute a novel DNA-binding domain, comprising amino acids located within and amino-terminal to the nominal basic region.