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The Hand gene family encodes highly conserved basic helix-loop-helix (bHLH)transcription factors that play crucial roles in cardiac and vascular development in vertebrates. In Drosophila, a single Handgene is expressed in the three major cell types that comprise the circulatory system: cardioblasts, pericardial nephrocytes and lymph gland hematopoietic progenitors, but its function has not been determined. Here we show that Drosophila Hand functions as a potent transcriptional activator, and converting it into a repressor blocks heart and lymph gland formation. Disruption of Hand function by homologous recombination also results in profound cardiac defects that include hypoplastic myocardium and a deficiency of pericardial and lymph gland hematopoietic cells, accompanied by cardiac apoptosis. Targeted expression of Hand in the heart completely rescued the lethality of Hand mutants, and cardiac expression …