Id2 is a natural inhibitor of the basic helix-loop-helix transcription factors and the retinoblastoma tumor suppressor protein. Active Id2 prevents differentiation and promotes cell-cycle progression and tumorigenesis in the nervous system. A key event that regulates Id2 activity during differentiation is translocation from the nucleus to the cytoplasm. Here we show that the actin-associated protein enigma homolog (ENH) is a cytoplasmic retention factor for Id2. ENH contains three LIM domains, which bind to the helix-loop-helix domain of Id proteins in vitro and in vivo. ENH is up-regulated during neural differentiation, and its ectopic expression in neuroblastoma cells leads to translocation of Id2 from the nucleus to the cytoplasm, with consequent inactivation of transcriptional and cell-cycle-promoting functions of Id2. Conversely, silencing of ENH by RNA interference prevents cytoplasmic relocation of Id2 in neuroblastoma cells differentiated with retinoic acid. Finally, the differentiated neural crest-derived tumor ganglioneuroblastoma coexpresses Id2 and ENH in the cytoplasm of ganglionic cells. These data indicate that ENH contributes to differentiation of the nervous system through cytoplasmic sequestration of Id2. They also suggest that ENH is a restraining factor of the oncogenic activity of Id proteins in neural tumors.