Waardenburg syndrome (WS) is a hereditary disorder that causes hypopigmentation and hearing impairment. Depending on additional symptoms, WS is classified into four types: WS1, WS2, WS3 and WS4. Mutations in MITF (microphthalmia-associated transcription factor) and PAX3, encoding transcription factors, are responsible for WS2 and WS1/WS3, respectively. We have previously shown that MITF transactivates the gene for tyrosinase, a key enzyme for melanogenesis, and is critically involved in melanocyte differentiation. Absence of melanocytes affects pigmentation in the skin, hair and eyes, and hearing function in the cochlea. Therefore, hypopigmentation and hearing loss in WS2 are likely to be the results of an anomaly of melanocyte differentiation caused by MITF mutations. However, the molecular mechanism by which PAX3 mutations cause the auditory-pigmentary symptoms in WS1/WS3 remains to be explained. Here we show that PAX3, a transcription factor with a paired domain and a homeodomain, transactivates the MITF promoter. We further show that PAX3 proteins associated with WS1 in either the paired domain or the homeodomain fail to recognize and transactivate the MITF promoter. These results provide evidence that PAX3 directly regulates MITF and suggest that the failure of this regulation due to PAX3 mutations causes the auditory-pigmentary symptoms in at least some individuals with WS1.