Maturity-onset diabetes of the young (MODY) is an autosomal dominant form of diabetes characterized by early onset of pancreatic dysfunction. MODY type 3 is caused by mutations in the hepatocyte nuclear factor (HNF)-1alpha. During a screening of Norwegian patients with suspected MODY we identified two novel HNF-1alpha mutations, P112L and Q466X. The molecular mechanisms underlying the disease were studied by analyzing the DNA binding properties, transcriptional activation, and subcellular localization of HNF-1alpha P112L and Q466X compared to wild type HNF-1alpha. P112L had reduced ability to bind an HNF1 consensus sequence and to activate transcription. Q466X did not differ from wild type HNF-1alpha in DNA binding activity. Transactivation, however, was markedly reduced. When both mutants were coexpressed with wild type HNF-1alpha in HeLa cells, transcriptional activity appeared unaffected, suggesting that a dominant-negative mechanism was not present. Immunolocalization experiments showed that P112L HNF-1alpha was correctly targeted to nuclei in HeLa cells. In contrast, some Q466X HNF-1alpha protein was retained in the cytoplasm, which indicated that the mechanism for nuclear localization was disturbed. Thus, the HNF-1alpha mutations P112L and Q466X both seem to impair pancreatic beta-cell function by loss-of-function mechanisms; P112L by reduced DNA binding and reduced ability to transactivate, and Q466X by reduced transactivation and incomplete nuclear targeting.