Dermo-1 is a multifunctional basic helix-loop-helix (bHLH) transcription factor that has been shown to be a potent negative regulator for gene transcription and apoptosis. To understand the molecular mechanisms that mediate the function of Dermo-1, we generated a series of Dermo-1 mutants and used a MyoD-mediated transcriptional activation model to characterize the roles of its N-terminal, bHLH, and C-terminal structural domains in transcriptional repression. Both the C-terminal and HLH domains of Dermo-1 were essential for its repression of MyoD-mediated transactivation. Dermo-1 repressed, in a dose-dependent fashion, the transactivation activity of myocyte enhancer factor 2 (MEF2), a protein known to cooperate with MyoD in activating E-box-dependent gene expression. Both the N- and C-terminal domains of Dermo-1, but not the bHLH domain, were required for the inhibition of MEF2, suggesting that Dermo-1 inhibits both MyoD- and MEF2-dependent transactivation but through different mechanisms. Dermo-1 interacted directly with MEF2 and selectively repressed the MEF2 transactivation domain. An overall increase of histone acetylation induced by trichostatin A treatment reduced Dermo-1 transcriptional repression activity, suggesting that histone deacetylation is involved in Dermo-1-mediated transcriptional repression. Together, these results suggest that MEF2 is an important target in Dermo-1-mediated transcriptional repression and provide initial evidence of the involvement of histone acetylation in Dermo-1 transcriptional repression.