Glis2 is a member of the Gli-similar (Glis) subfamily of Krüppel-like zinc finger transcription factors. It functions as an activator and repressor of gene transcription. To identify potential co-activators or co-repressors that mediate these actions of Glis2, we performed yeast two-hybrid analysis using Glis2 as bait. C-terminal binding protein 1 (CtBP1) was identified as one of the proteins that interact with Glis2. This interaction was confirmed by mammalian two-hybrid analysis. CtBP1 did not interact with other members of the Glis subfamily suggesting that this interaction is specific for Glis2. Pulldown analysis with GST-CtBP1 demonstrated that CtBP1 physically interacts with Glis2. Analysis of CtBP1 and Glis2 deletion mutants identified several regions important for this interaction. CtBP1 repressed transcriptional activation induced by Glis2(1-171). Repression by Glis2 appears to involve the recruitment of both CtBP1 and histone deacetylase 3 (HDAC3). Confocal microscopic analysis demonstrated that Glis2 localized to nuclear speckles while in most cells CtBP1 was found diffusely in both cytoplasm and nucleus. However, when CtBP1 and Glis2 were co-expressed, CtBP1 was restricted to nuclear speckles and co-localized with Glis2. Our observations suggest that the co-repressor CtBP1 and HDAC3 are part of transcription silencing complex that mediates the transcriptional repression by Glis2.