Rex-1 (Zfp-42) is a known marker for undifferentiated embryonic stem cells and teratocarcinoma cells. However, the mechanism by which Rex-1 is regulated in pluripotent cells remains unresolved. Here we report that Nanog, an Nk-2 homeodomain protein known for its role in maintaining stem cell pluripotency, is a transcription activator for the Rex-1 promoter. Knockdown of Nanog in embryonic stem cells resulted in a reduction of Rex-1 expression, whereas forced expression of Nanog in P19 stimulated Rex-1 expression. Employing a Rex-1 reporter, we demonstrate that Nanog transactivates Rex-1 directly. Serial deletion studies mapped the Nanog-responsive element between -187 and -286 of the Rex-1 promoter. Although Oct-3/4 and Sox2 can both transactivate Rex-1 promoter, only Sox2 cooperates with Nanog in up-regulating Rex-1. Furthermore, we demonstrate that the C terminus of Nanog is responsible for transactivating the Rex-1 promoter, a function that can be substituted for by a viral transactivator Vp16 efficiently in NIH3T3 cells but less so in P19 cells. Taking these findings together, we conclude that Rex-1 is a direct target of Nanog, which is augmented by Sox2 and Oct-3/4.