Processed genes are generated by reverse transcription of mRNA and integration at a novel site in the genome and are typically transcriptionally silent. Here, we report that a processed gene on rat chromosome 4 that is highly related to the X chromosome-encoded rat Pem (r.Pem) homeobox gene is transcriptionally active. This processed gene, r.Pem2, is expressed at high levels in epididymis but not in any other tissues that express the r.Pem gene, including testis. Although r.Pem2, is expressed at high levels in epididymis but not in any other tissues that express the r.Pem gene, including testis. Although r.Pem2 lacks all the introns present in the r.Pem gene, it contains splice donor and acceptor sequences within the coding region, permitting it to be spliced and to potentially encode a 57 amino acid polypeptide. r.Pem2 transcripts accumulate in the caput and cauda regions of the epididymis but not in the initial segment. The r.Pem2 gene exhibits different regulation from the r.Pem gene; its expression is induced later during prepubertal development (between days 23 and 30 post partum) and independently of the presence of testosterone. Although the functional significance of r.Pem2 is unknown, its developmental regulation and its apparent acquisition of splicing sites during evolution are unique.