Mutations in the human cartilage oligomeric matrix protein (COMP) gene have been linked to the development of pseudoachondroplasia and multiple epiphyseal dysplasia. We previously cloned the promoter region of the COMP gene and delineated a minimal negative regulatory element (NRE) that is both necessary and sufficient to repress its promoter (Issack, P. S., Fang, C. H., Leslie, M. P., and Di Cesare, P. E. (2000) J. Orthop. Res. 18, 345-350; Issack, P. S., Liu, C. J., Prazak, L., and Di Cesare, P. E. (2004) J. Orthop. Res. 22, 751-758). In this study, a yeast one-hybrid screen for proteins that associate with the NRE led to the identification of the leukemia/lymphoma-related factor (LRF), a transcriptional repressor that contains a POZ (poxvirus zinc finger) domain, as an NRE-binding protein. LRF bound directly to the NRE both in vitro and in living cells. Nine nucleotides (GAGGGTCCC) in the 30-bp NRE are essential for binding to LRF. LRF showed dose-dependent inhibition of COMP-specific reporter gene activity, and exogenous overexpression of LRF repressed COMP gene expression in both rat chondrosarcoma cells and bone morphogenetic protein-2-treated C3H10T1/2 progenitor cells. In addition, LRF also inhibited bone morphogenetic protein-2-induced chondrogenesis in high density micromass cultures of C3H10T1/2 cells, as evidenced by lack of expression of other chondrocytic markers, such as aggrecan and collagen types II, IX, X, and XI, and by Alcian blue staining. LRF associated with histone deacetylase-1 (HDAC1), and experiments utilizing the HDAC inhibitor trichostatin A revealed that LRF-mediated repression requires deacetylase activity. LRF is the first transcription factor found to bind directly to the COMP gene promoter, to recruit HDAC1, and to regulate both COMP gene expression and chondrogenic differentiation.