The crystal structure of a complex between the novel homeodomain of the neural transcription factor Prospero and DNA shows that the invariant residues Lys1290, Asn1294, and Asp1297 make specific contacts with the noncanonical DNA binding site. The overall structure includes the homeodomain and the adjacent Prospero domain and confirms that they act as a single structural unit, a Homeo-Prospero domain. The Prospero domain facilitates the proper alignment of the protein on the DNA. Knowledge of the structure reconciles two different DNA sequences that have been proposed as transcriptional targets for Prospero. As in the apo structure, the C terminus of the Prospero domain shields a short helix within the homeodomain that includes a nuclear export signal (NES). The structural results suggest that exposure of the NES is not coupled directly to DNA binding. We propose a DNA recognition mechanism specific to Prospero-type homeodomains in developing cells.