The pathogenicity of many bacteria depends on the injection of effector proteins via type III secretion into eukaryotic cells in order to manipulate cellular processes. TAL (transcription activator–like) effectors from plant pathogenic Xanthomonas are important virulence factors that act as transcriptional activators in the plant cell nucleus, where they directly bind to DNA via a central domain of tandem repeats. Here, we show how target DNA specificity of TAL effectors is encoded. Two hypervariable amino acid residues in each repeat recognize one base pair in the target DNA. Recognition sequences of TAL effectors were predicted and experimentally confirmed. The modular protein architecture enabled the construction of artificial effectors with new specificities. Our study describes the functionality of a distinct type of DNA binding domain and allows the design of DNA binding domains for biotechnology.