Plays a role as a transcriptional activator or repressor (PubMed:21875655). Inhibits several cytokine signaling pathways, such as TGFB1, activin-A/INHBA and BMP4 by interfering with the transcriptional stimulatory activity of transcription factors, such as MSX2, FAST2, SMAD2 and SMAD3 during hematopoietic cell differentiation (By similarity). Plays a role in terminal differentiation of interneurons, such as amacrine and bipolar cells in the developing retina (PubMed:21875655). Likely to play a regulatory role in the development of the ventral forebrain (PubMed:1676488). May play a role in craniofacial patterning and morphogenesis and may be involved in the early development of diencephalic subdivisions (PubMed:1676488). Interacts with SMAD4 (via homeobox DNA-binding domain) (By similarity). Interacts (via homeobox DNA-binding domain) with POU4F2; this interaction suppresses DLX1-mediated transcriptional activity in postnatal retina and enhances retinal ganglion cell (RGC) differentiation (PubMed:21875655). Expressed in a restricted region of the developing brain, within the diencephalon and the adjacent telencephalic regions. Expressed in developing retinal progenitor cells at 12 dpc (PubMed:21875655). Has a segmental expression in the developing forebrain (PubMed:1676488). The homeobox DNA-binding domain is necessary for its nuclear localization, transcriptional and erythroid differentiation activities. Belongs to the distal-less homeobox family.