Hepatocyte nuclear factor 1alpha (HNF1alpha) is an atypical dimeric homeodomain-containing protein that is expressed in liver, intestine, stomach, kidney, and pancreas. Mutations in the HNF1alpha gene are associated with an autosomal dominant form of non-insulin-dependent diabetes mellitus called maturity-onset diabetes of the young (MODY3). More than 80 different mutations have been identified so far, many of which involve highly conserved amino acid residues among vertebrate HNF1alpha. In the present work, we investigated the molecular mechanisms by which MODY3 mutations could affect HNF1alpha function. For this purpose, we analyzed the properties of 10 mutants resulting in amino acid substitutions or protein truncation. Some mutants have a reduced protein stability, whereas others are either defective in the DNA binding or impaired in their intrinsic trans-activation potential. Three mutants, characterized by a complete loss of trans-activation, behave as dominant negatives when transfected with the wild-type protein. These data define a clear causative relationship between MODY3 mutations and functional defects in HNF1alpha trans-activation. In addition, our analysis sheds new light on the structure of a homeoprotein playing a key role in pancreatic beta cell function.