Hepatocyte nuclear factor (HNF)1alpha is a homeo-domain-containing transcription factor participating in the regulation of gene expression in liver, kidney, gut and pancreas of vertebrates. In humans mutations in the HNF1 gene are responsible for one form of maturity onset diabetes of the young (MODY3). To define the molecular mechanism underlying MODY3 we investigated the functional properties of seven MODY3-associated mutations representing the spectrum of different kinds of mutations affecting all functional domains of the protein. The mutations introduced into an expression vector encoding human HNF1alpha include in-frame deletion (AN127), nonsense (Q7X, R171X), frameshift (P291fsinsC) and missense (R229Q, P447L, T6201) mutations. Gel retardation and reporter gene assays showed that the functional properties of these mutants differ dramatically, but none of these mutants act in a dominant negative manner. Moreover, the mRNA stability of the mutants AN127, R171X, P291fsinsC and T547E548fsdelTG is impaired compared to the wild-type sequence in transfected cells. This decreased RNA stability is independent of the presence of an intron in the expression vector and thus differs from mechanisms known to be involved in nonsense-mediated decay (NMD). Our results suggest that haploinsufficiency of HNF1alpha is responsible for the pathogenesis of MODY3.