The AP-2 family of transcription factors (AP-2alpha, AP-2beta and AP-2gamma) is temporally and spatially regulated in mammals and has also been implicated in oncogenesis. Here we report the isolation of genomic and cDNA clones encoding the Drosophila homologue of AP-2, designated DAP-2. The predicted amino acid sequence exhibits 42-45% overall identity with the vertebrate AP-2 proteins. A sequence of 107 amino acids within the DNA binding and dimerization domain of the vertebrate AP-2 proteins is highly conserved (90-92%) with the DAP-2 homologue. An in vitro translation product of DAP-2 cDNA binds specifically to AP-2 consensus binding sites. DAP-2 was also shown to be functionally conserved in vivo because transient transfection of a DAP-2 expression plasmid activated transcription through AP-2 binding sites in both mammalian and Drosophila cell lines. DAP-2 is expressed during early embryogenesis and DAP-2 transcripts are also detected in the adult. Whole-mount in situ hybridizations demonstrated that DAP-2 is expressed initially at stage 9 of Drosophila embryonic development and that DAP-2 transcripts are detected in regions of the brain, eye-antennal disc, optical lobe, antenno-maxillary complex, and in a subset of cells of the ventral nerve cord. The cloning of DAP-2 and the identification of the DAP-2 expression pattern during embryogenesis provides a starting point to address the function of AP-2 during differentiation and development in a well understood model system.