The Drosophila ecdysone receptor (EcR)/ultraspiracle (USP) heterodimer is a key regulator in molting and metamorphoric processes, activating and repressing transcription in a sequence-specific manner. Here, we report the isolation of an EcR-interacting protein, SMRTER, which is structurally divergent but functionally similar to the vertebrate nuclear corepressors SMRT and N-CoR. SMRTER mediates repression by interacting with Sin3A, a repressor known to form a complex with the histone deacetylase Rpd3/HDAC. Importantly, we identify an EcR mutant allele that fails to bind SMRTER and is characterized by developmental defects and lethality. Together, these results reveal a novel nuclear receptor cofactor that exhibits evolutionary conservation in the mechanism to achieve repression and demonstrate the essential role of repression in hormone signaling.