NK-4, also called msh2 and tinman, encodes a homeodomain transcription factor that is required for the development of the dorsal mesoderm and its derivatives in the Drosophila embryo. Genetic analyses indicate that NK-4 resides downstream of the mesodermal determinant twist, which encodes a basic helix-loop-helix-type transcription factor. However, the regulation of NK-4 by twist remains poorly understood. Using expression assays in cultured cells and transgenic flies, we show that two distinct clusters of E-box regulatory sequences, present upstream of the NK-4 gene, mediate NK-4 expression in the visceral mesoderm. These elements are conserved between the Drosophila melanogaster and Drosophila virilis NK-4 genes and serve as binding sites for Twist (E1 cluster) and NK-4 (E2 cluster) proteins. In cultured cells, Twist and NK-4 binding results in activation of NK-4 gene expression. In transgenic animals, the E1 and E2 clusters are functionally connected, and both elements are required for NK-4 activation in cells of the visceral mesoderm and also for NK-4 repression in cells of the somatic musculature. These results demonstrate that NK-4 is a direct transcriptional target for Twist and its own gene product in visceral mesodermal cells, supporting the idea that twist and NK-4 function in the subdivision of the mesoderm during Drosophila embryogenesis.