Drosophila C-terminal binding protein functions as a context-dependent transcriptional co-factor and interferes with both mad and groucho transcriptional repression.

Drosophila C-terminal binding protein (dCtBP) and Groucho have been identified as Hairy-interacting proteins required for embryonic segmentation and Hairy-mediated transcriptional repression. While both dCtBP and Groucho are required for proper Hairy function, their properties are very different. As would be expected for a co-repressor, reduced Groucho activity enhances the hairy mutant phenotype. In contrast, reduced dCtBP activity suppresses it. We show here that dCtBP can function as either a co-activator or co-repressor of transcription in a context-dependent manner. The regions of dCtBP required for activation and repression are separable. We find that mSin3A-histone deacetylase complexes are altered in the presence of dCtBP and that dCtBP interferes with both Groucho and Mad transcriptional repression. Similar to CtBP's role in attenuating E1A's oncogenicity, we propose that dCtBP can interfere with corepressor-histone deacetylase complexes, thereby attenuating transcriptional repression. Hairy defines a new class of proteins that requires both CtBP and Groucho co-factors for proper function.