The CDK8 kinase module (CKM) is a conserved, dissociable Mediator subcomplex whose component subunits were genetically linked to the RNA polymerase II (RNAPII) C-terminal domain (CTD) and individually recognized as transcriptional repressors before Mediator was identified as a pre-eminent complex in eukaryotic transcription regulation. We used macromolecular EM and biochemistry to investigate the subunit organization, structure and Mediator interaction of the Saccharomyces cerevisiae CKM. We found that interaction of the CKM with Mediator's middle module interferes with CTD-dependent RNAPII binding to a previously unknown middle-module CTD-binding site and with the holoenzyme formation process. Taken together, our results reveal the basis for CKM repression, clarify the origin of the connection between CKM subunits and the CTD and suggest that a combination of competitive interactions and conformational changes that facilitate holoenzyme formation underlie the mechanism of transcription regulation by Mediator.