Melatonin is synthesized in the pineal gland during nighttime in response to nocturnal increase in the activity of the enzyme aralkylamine N-acetyltransferase (AANAT), the transcription of which is modulated by several homeodomain transcription factors. Recent work suggests that the homeodomain transcription factor ISL LIM homeobox 2 (ISL2) is expressed in the pineal gland, but its role is currently unknown. With the purpose of identifying the mechanisms that control pineal expression of Isl2 and the possible function of Isl2 in circadian pineal biology, we report that Isl2 is specifically expressed in the pinealocytes of the rat pineal gland. Its expression exhibits a 24 h rhythm with high transcript and protein levels during the day and a trough in the second half of the night. This rhythm persists in darkness, and lesion studies reveal that it requires intact function of the suprachiasmatic nuclei, suggesting intrinsic circadian regulation. In vivo and in vitro experiments show that pineal Isl2 expression is repressed by adrenergic signaling acting via cyclic AMP; further, Isl2 is negatively regulated by the nocturnal transcription factor cone-rod homeobox. During development, pineal Isl2 expression is detectable from embryonic day 19, preceding Aanat by several days. In vitro knockdown of Isl2 is accompanied by an increase in Aanat transcript levels suggesting that ISL2 represses its daytime expression. Thus, rhythmic expression of ISL2 in pinealocytes is under the control of the suprachiasmatic nucleus acting via adrenergic signaling in the gland to repress nocturnal expression, while ISL2 itself negatively regulates daytime pineal expression of Aanat and thereby suggestively enhances the circadian rhythm in melatonin synthesis.