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The myogenic basic helix-loop-helix proteins are essential components of the regulatory network controlling vertebrate myogenesis. However, determined myoblasts appear in the limb buds which do not initially express any member of this transcription factor family. In a search for potential novel regulators of myogenesis, a human PAX-7 cDNA was isolated from primary myoblasts. Analysis of the DNA-binding properties of the Pax-7 paired domain revealed that it binds DNA in a sequence-specific manner indistinguishable from that of the paralogous Pax-3 protein. Each of the two proteins also binds to palindromic homeodomain-binding sites by cooperative dimerization. Both Pax-3 and Pax-7, which are known to partially overlap in their expression during development, can also efficiently form heterodimers on these sites and stimulate reporter gene transcription in transient transfection experiments which, in the case of Pax-7, is dependent on the transactivation function encoded by the C-terminal sequences. Thus, the formation of heterodimers might have important consequences for target gene recognition and regulation during development. PAX-7 was found to be weakly expressed in normal human myoblasts, while PAX-3 could not be detected in these cells at all. However, transcripts for either PAX-3 and/or PAX-7 were expressed at elevated levels in tumorigenic rhabdomyosarcoma cell lines. Hence, overexpression of these PAX genes may be involved in the genesis of myogenic tumors.