The keratinoctye-specific transcription of the profilaggrin gene is regulated by activator protein 1 (AP1). Transactivation is achieved through binding of c-jun/c-fos heterodimers at an AP1 site at position -77 of the proximal promoter region. DNase 1 footprinting showed that recombinant c-jun protected the AP1 motif between -79 and -67, and a second region between -20 and -5. The latter protected sequence encompasses a non-canonical AP1 motif overlapping an octamer site. In transiently transfected normal human keratinocytes mutations in this protected sequence reduced the activity of a reporter gene to <25% and abolished the transactivating effect of c-jun. DNase 1 footprinting with two homeobox-containing proteins, Oct2 and D1x3, produced an identical footprint between -20 and -5. Bandshift experiments confirmed that the homeobox containing proteins Oct2, Skin 1 and Dlx3 competed with c-jun for the binding. We found that transfection of profilaggrin CAT constructs with octamer factors Oct6, Skin1, or with Dlx3 reduced the reporter expression. However, the repression did not require binding of these proteins to DNA. The homeobox-containing octamer proteins have been implicated in transcriptional repression in cultured keratinocytes. Recently we have shown that Dlx3 is important for normal epidermal differentiation in vivo and that premature expression of the protein in basal cells results in downregulation of profilaggrin and loricrin transcription in the granular layer and in their ectopic expression in the basal layer. Bandshift analysis using the entire profilaggrin proximal promoter region between -147 and +48 revealed that c-jun interacted cooperatively with Oct2 or with Dlx3. In addition, binding of Oct2 or Dlx3 to the recognition site interfered with the interactions of the basal transcription factors TFIID and TFIIB over the adjacent TATA box. These data suggest that the complex effect of the homeobox-containing proteins is mediated by interaction with the basal transcriptional machinery and with the AP1 factors over the proximal promoter region of the profilaggrin gene.