Proteins of the closely related homeodomain-leucine zipper (HD-Zip) families I and II in plants are putative transcription factors that interact with similar pseudopalindromic DNA recognition sites. We have previously described the Oshox1 gene from rice, which encodes an HD-Zip II protein. To identify further rice HD-Zip proteins, one-hybrid screens were performed in yeast strains containing a HIS3 reporter gene with upstream HD-Zip recognition sites. This resulted in the isolation of six new cDNAs encoding HD-Zip proteins belonging to family I (Oshox4, -5, -6) or family II (Oshox2, -3, -7). In transient assays, using rice suspension-cultured cells transformed by particle bombardment, we showed previously that Oshox1 can transcriptionally repress the activity of reporter gene constructs with upstream HD-Zip binding sites. Here, we confirm the repression properties of Oshox1 by showing that the repression function can be conferred on a heterologous DNA-binding domain. This portable functional domain (residues 1-155) is located proximal to the HD-Zip domain. In yeast, the same region of the Oshox1 protein was found to confer transcriptional activation instead of repression, pointing to the possibility that cell type-specific factors may determine the functional properties of the Oshox1 protein in rice. Like Oshox1, another HD-Zip family II protein (Oshox3) was also found to function as a transcriptional repressor in rice cells. In contrast, two HD-Zip I family proteins (Oshox4 and -5) appeared to act as activators in both rice and yeast cells. Results of two-hybrid assays and electrophoretic mobility shift assays strongly suggest that all HD-Zip proteins of families I and II can form homodimers and also heterodimers with all HD-Zip proteins of the same family. Heterodimerization across the HD-Zip families I and II apparently does not to occur.