In this study, we first cloned nlz2, a second zebrafish member of the nlz-related zinc-finger gene family. nlz2 was expressed together with nlz1 in a broad posterior domain during gastrula stages as well as at the midbrain-hindbrain boundary and in the hindbrain caudal to rhombomere 4 during segmentation. nlz2 was also expressed in regions distinct from nlz1, notably in the forebrain, midbrain, and trunk. Misexpression of nlz2 in zebrafish embryos disrupted gene expression in the rostral hindbrain, similar to the effect of misexpressing nlz1. We next compared the nlz1 and nlz2 sequences to identify and characterize domains conserved within this family. We found a C-terminal domain required for nuclear localization and two conserved domains (the Sp motif and a putative C(2)H(2) zinc finger) required for nlz1 function. We also demonstrate that Nlz1 self-associated via its C terminus, interacted with Nlz2, and bound to histone deacetylases. Last, we found two forms of Nlz1 generated from alternative translation initiation sites in vivo. These forms have distinct activities, apparently depending on the function of the N-terminal Sp motif. Our data demonstrate that nlz2 functions similarly to nlz1 and define conserved domains essential for nuclear localization, self-association, and corepressor binding in this novel family of zinc-finger genes.