Evolutionary Adaptation of the Fly Pygo PHD Finger toward Recognizing Histone H3 Tail Methylated at Arginine 2

Pygo proteins promote Armadillo- and β-catenin-dependent transcription, by relieving Groucho-dependent repression of Wnt targets. Their PHD fingers bind histone H3 tail methylated at lysine 4, and to the HD1 domain of their Legless/BCL9 cofactors, linking Pygo to Armadillo/β-catenin. Intriguingly, fly Pygo orthologs exhibit a tryptophan > phenylalanine substitution in their histone pocket-divider which reduces their affinity for histones. Here, we use X-ray crystallography and NMR, to discover a conspicuous groove bordering this phenylalanine in the Drosophila PHD-HD1 complex—a semi-aromatic cage recognizing asymmetrically methylated arginine 2 (R2me2a), a chromatin mark of silenced genes. Our structural model of the ternary complex reveals a distinct mode of dimethylarginine recognition, involving a polar interaction between R2me2a and its groove, the structural integrity of which is crucial for normal tissue patterning. Notably, humanized fly Pygo derepresses Notch targets, implying an inherent Notch-related function of classical Pygo orthologs, disabled in fly Pygo, which thus appears dedicated to Wnt signaling.