Mutations in the photoreceptor transcription factor cone-rod homeobox (CRX) have been identified in patients with several forms of retinal degenerative disease. To investigate the mechanisms by which these mutations cause photoreceptor degeneration, CRX constructs representing eleven known mutations, as well as a set of C-terminal deletions, were generated and tested for their ability to activate a rhodopsin-luciferase reporter in a transient cell transfection assay. To further define functional domains, several Gal4dbd-Crx fusions were similarly tested using a Gal4 response element containing heterologous promoter. This analysis demonstrated that the C-terminal region, between amino acids 200 and 284, is essential for CRX-mediated transcriptional activation. Consistent with this, four mutants carrying C-terminal truncations demonstrated significantly reduced transcriptional activation. Confirming the importance of the homeo-domain (HD), four of the five mutants carrying HD missense mutations displayed altered transactivating activity, either decreased (three) or increased (one). In vitro protein-DNA binding assays (EMSAs) with CRX-HD peptides representing the three HD mutants with decreased transactivating activity, indicated that the alteration was due to reduced, but not abolished, DNA binding to CRX targets. Taken together, these results support the hypothesis that CRX mutations involved in human photoreceptor degeneration act by impairing CRX-mediated transcriptional regulation of the photoreceptor genes. However, a clear relationship between the magnitude of biochemical abnormality and degree of disease severity was not observed, suggesting that other genetic and environmental modifiers may also contribute to the disease phenotype.