The basic helix-loop-helix (bHLH) protein DIMMED (DIMM) supports the differentiation of secretory properties in numerous peptidergic cells of Drosophila melanogaster. DIMM is coexpressed with diverse amidated neuropeptides and with the amidating enzyme peptidylglycine α-hydroxylating monooxygenase (PHM) in approximately 300 cells of the late embryo. Here we confirm that DIMM has transcription factor activity in transfected HEK 293 cells and that the PHM gene is a direct target. The mammalian DIMM orthologue MIST1 also transactivated the PHM gene. DIMM activity was dependent on the basic region of the protein and on the sequences of three E-box sites within PHM's first intron; the sites make different contributions to the total activity. These data suggest a model whereby the three E boxes interact cooperatively and independently to produce high PHM transcriptional activation. This DIMM-controlled PHM regulatory region displayed similar properties in vivo. Spatially, its expression mirrored that of the DIMM protein, and its activity was largely dependent on dimm. Further, in vivo expression was highly dependent on the sequences of the same three E boxes. This study supports the hypothesis that DIMM is a master regulator of a peptidergic cell fate in Drosophila and provides a detailed transcriptional mechanism of DIMM action on a defined target gene.