SM/J is an inbred mouse strain with a complex phenotype including small body size, impaired immune response and a tissue-specific sialidase deficiency. We identified a regulatory mutation, (-519G-->A) within the neu1 promoter which in reporter assays resulted in significantly reduced transcription. This mutation generates a consensus binding site for Nkx3 family transcription repressors. Recombinant Nkx3.2 bound strongly to and preferentially repressed transcription of the mutant promoter. This tissue-specific deficiency results in a retarded immune response and modulates leukocyte recruitment. Examination of the hepatic microcirculation in mutant mice revealed increased rolling and decreased adhesion of leukocytes. Our findings support a significant role for lysosomal sialidase in inflammation and highlight the significance of repressor-recruitment in genetic disease.