The Pax gene egl-38 plays an important role in the development of several organs in C. elegans. To understand how a Pax transcription factor influences distinct developmental choices in different cells and tissue types, we have characterized a second gene, lin-48. lin-48 functions with egl-38 in the development of one structure, the hindgut, but not in other tissues such as the egg-laying system. We show that lin-48 encodes a C2H2 zinc-finger protein that is similar to the product of the Drosophila gene ovo and is expressed in the hindgut cells that develop abnormally in lin-48 mutants. We present evidence that lin-48 is a target for EGL-38 in hindgut cells. We show that lin-48 requires egl-38 for its expression in the hindgut. Using deletion analysis, we have identified two elements in the lin-48 promoter that are necessary for lin-48 expression. We demonstrate that EGL-38 binds with high affinity to one of these elements. In addition, we have observed genetic interactions between mutations in the lin-48 promoter and specific alleles of egl-38. These experiments demonstrate a functional link between Pax and Ovo transcription factors, and provide a model for how Pax transcription factors can regulate different target genes in different cells.