The mammalian Ror family receptor tyrosine kinases, Ror1 and Ror2, play crucial roles in developmental morphogenesis. Although the functions of Ror1 and Ror2 are redundant, Ror2 exhibits more specific functions during development. We show that when expressed in mammalian cells, Ror2, but not Ror1, associates with the melanoma-associated antigen (MAGE) family protein, Dlxin-1, which is known to bind to the homeodomain proteins Msx2 and Dlx5 and regulate their transcriptional functions. This association requires the cytoplasmic C-terminal region of Ror2, containing proline-rich and serine/threonine-rich domains, and the C-terminal necdin homology domain of Dlxin-1. Interestingly, the cytoplasmic C-terminal region of Ror2 is missing in patients with brachydactyly type B. Interestingly, transient expression and immunohistochemical analyses reveal that both Dlxin-1 and Msx2 are co-localized in the nuclei in the absence of Ror2. In the presence of Ror2, Dlxin-1 is co-localized with Ror2 at the membranous compartments and Msx2 is retained in the nuclei. It was also found that the majority of cellular Dlxin-1 is retained in the membrane fractions of wild-type but not Ror2-/- mouse embryonic fibroblasts. Furthermore, we show that transcriptional activity of Msx2, irrespective of Ror2 kinase activity, is regulated by ectopic expression of Ror2 using a reporter plasmid containing the WIP element. Thus, Ror2 sequesters Dlxin-1 in membranous compartments, thereby affecting the transcriptional function of Msx2.