The mouse transcription factor PEEPS is a heterodimer of two subunits: a DNA binding subunit alpha and its partner subunit beta. The alpha subunit shares a region of high homology, termed the Punt domain, with the products of the Drosophila melanogaster segmentation gene runt and the human acute myeloid leukemia-related gene AML1. To study the molecular basis for the DNA binding and heterodimerization functions of this factor, we constructed series of deletions of the alpha and beta subunits and examined their activities by electrophoretic mobility shift and affinity column assays. The minimal functional region of the alpha subunit for DNA binding and dimerization was shown to coincide with the Punt domain. On the other hand, the region of the beta subunit required for heterodimerization was localized to the N-terminal 135 amino acids. Furthermore, it was found that the DNA binding activity of the Punt domain is regulated by a reduction/oxidization (redox) mechanism and that its reductively activated state, which is extremely labile, is stabilized by the beta subunit. These findings add a new layer to the mechanism and significance of the regulatory interplay between the two subunits of PEBP2.