Vertebrate Pax proteins share a conserved 128-amino-acid DNA-binding motif, the paired domain. The PAX6 gene, which is mutated in the murine Small eye and human aniridia developmental defects, also encodes a second protein with a 14-amino-acid insertion in the paired domain. This protein, which arises by alternative mRNA splicing, exhibits unique DNA-binding properties. Unlike other paired domains, which bind DNA predominantly by their amino termini, the extended Pax6 paired domain interacts with DNA exclusively through its carboxyl terminus. This property can be stimulated by deletion of 30 amino-terminal residues from the Pax6 or Pax2 paired domains. Thus, the insertion acts as a molecular toggle to unmask the DNA-binding potential of the carboxyl terminus. The functional nonequivalence of the two Pax6 proteins is underscored by a T-->C mutation at position -3 of the alternative splice acceptor site that changes the ratio of the two isoforms and causes a distinct human ocular syndrome.