Mediator is a modular multiprotein complex required for regulated transcription by RNA polymerase (Pol) II. Here, we show that the middle module of the Mediator core contains a submodule of unique structure and function that comprises the N-terminal part of subunit Med7 (Med7N) and the highly conserved subunit Med31 (Soh1). The Med7N/31 submodule shows a conserved novel fold, with two proline-rich stretches in Med7N wrapping around the right-handed four-helix bundle of Med31. In vitro, Med7N/31 is required for activated transcription and can act in trans when added exogenously. In vivo, Med7N/31 has a predominantly positive function on the expression of a specific subset of genes, including genes involved in methionine metabolism and iron transport. Comparative phenotyping and transcriptome profiling identify specific and overlapping functions of different Mediator submodules.