Evolutionarily conserved ovo loci encode developmentally regulated, sequence-specific, DNA-binding, C(2)H(2)-zinc-finger proteins required in the germline and epidermal cells of flies and mice. The direct targets of OVO activity are not known. Genetic experiments suggest that ovo acts in the same regulatory network as ovarian tumor (otu), but the relative position of these genes in the pathway is controversial. Three OVO-binding sites exist in a compact regulatory region that controls germline expression of the otu gene. Interestingly, the strongest OVO-binding site is very near the otu transcription start, where basal transcriptional complexes must function. Loss-of-function, gain-of-function and promoter swapping constructs demonstrate that OVO binding near the transcription start site is required for OVO-dependent otu transcription in vivo. These data unambiguously identify otu as a direct OVO target gene and raise the tantalizing possibility that an OVO site, at the location normally occupied by basal components, functions as part of a specialized core promoter.