The distal portion of the rat insulin I gene 5'-flanking DNA contains two sequence elements, the Far and FLAT elements, that can function in combination, but not separately, as a beta-cell-specific transcriptional enhancer. We have isolated several cDNAs encoding proteins that bind to the FLAT element. Two of these cDNAs, cdx-3 and lmx-1, represent homeo box containing mRNAs with restricted patterns of expression. The protein encoded by lmx-1 also contains two amino-terminal cysteine/histidine-rich "LIM" domains. Both cdx-3 and lmx-1 can activate transcription of a Far/FLAT-linked gene when expressed in a normally non-insulin-producing fibroblast cell line. Furthermore, in fibroblasts expressing transfected beta-cell lmx-1, the addition of the Far-binding, basic helix-loop-helix protein shPan-1 (the hamster equivalent of human E47) causes a dramatic synergistic activation. ShPan-1 causes no activation in fibroblasts expressing transfected cdx-3 or the related LIM-homeodomain protein isl-1. Deletion of one or both of the LIM domains from the 5' end of the lmx-1 cDNA removes this synergistic interaction with shPan-1 without any loss of basal transcriptional activation. We conclude that beta-cell lmx-1 functions by binding to the FLAT element and interacting through the LIM-containing amino terminus with shPan-1 bound at the Far element. These proteins form the minimal components for a functional minienhancer complex.