Decomposing transcriptional regulatory networks into functional modules and determining logical relations between them is the first step toward understanding transcriptional regulation at the system level. Modules based on analysis of genome-scale data can serve as the basis for inferring combinatorial regulation and for building mathematical models to quantitatively describe the behavior of the networks. We present here an algorithm called modem to identify target genes of a transcription factor (TF) from a single expression experiment, based on a joint probabilistic model for promoter sequence and gene expression data. We show how this method can facilitate the discovery of specific instances of combinatorial regulation and illustrate this for a specific case of transcriptional networks that regulate sporulation in the yeast Saccharomyces cerevisiae. Applying this method to analyze two crucial TFs in sporulation, Ndt80p and Sum1p, we were able to delineate their overlapping binding sites. We proposed a mechanistic model for the competitive regulation by the two TFs on a defined subset of sporulation genes. We show that this model accounts for the temporal control of the "middle" sporulation genes and suggest a similar regulatory arrangement can be found in developmental programs in higher organisms.