Myotonic dystrophy (DM) is an autosomal dominant neuromuscular disease that is associated with a (CTG)n repeat expansion in the 3'-untranslated region of the myotonin protein kinase (Mt-PK) gene. This study reports the isolation and characterization of a (CUG)n triplet repeat pre-mRNA/mRNA binding protein that may play an important role in DM pathogenesis. Two HeLa cell proteins, CUG-BP1 and CUG-BP2, have been purified based upon their ability to bind specifically to (CUG)8 oligonucleotides in vitro. While CUG-BP1 is the major (CUG)8-binding activity in normal cells, nuclear CUG-BP2 binding activity increases in DM cells. Both CUG-BP1 and CUG-BP2 have been identified as isoforms of a novel heterogeneous nuclear ribonucleoprotein (hnRNP), hNab50. The CUG-BP/hNab50 protein is localized predominantly in the nucleus and is associated with polyadenylated RNAs in vivo. In vitro RNA-binding/photocrosslinking studies demonstrate that CUG-BP/hNab50 binds to RNAs containing the Mt-PK 3'-UTR. We propose that the (CUG)n repeat region in Mt-PK mRNA is a binding site for CUG-BP/hNab50 in vivo, and triplet repeat expansion leads to sequestration of this hnRNP on mutant Mt-PK transcripts.