The posttranslational modifications of histones on chromatin or a lack thereof is critical in transcriptional regulation. Emerging studies indicate a role for histone-binding proteins in transcriptional activation and repression. We have previously identified template-activating factor-Ibeta (TAF-Ibeta, also called PHAPII, SET, and I(2)(pp2A)) as a component of a cellular complex called inhibitor of acetyltransferases (INHAT) that masks histone acetylation in vitro and blocks histone acetyltransferase (HAT)-dependent transcription in living cells. TAF-Ibeta has also been shown to associate with transcription factors, including nuclear receptors, to regulate their activities. To identify novel interactors of TAF-Ibeta, we employed a yeast two-hybrid screen and identified a previously uncharacterized human protein called thanatos-associated protein-7 (THAP7), a member of a large family of THAP domain-containing putative DNA-binding proteins. In this study we demonstrate that THAP7 associates with TAF-Ibeta in vitro and map their association domains to a C-terminal predicted coiled-coil motif on THAP7 and the central region of TAF-Ibeta. Similarly, stably transfected THAP7 associates with endogenous TAF-Ibeta in intact cells. Like TAF-Ibeta, THAP7 associates with histone H3 and histone H4 and inhibits histone acetylation. The histone-interacting domain of THAP7 is sufficient for this activity in vitro. Promoter-targeted THAP7 can also recruit TAF-Ibeta and silencing mediator of retinoid and thyroid receptors/nuclear hormone receptor corepressor (NCoR) proteins to promoters, and knockdown of TAF-Ibeta by small interfering RNA relieves THAP7-mediated repression, indicating that, like nuclear hormone receptors, THAP7 may represent a novel class of transcription factor that uses TAF-Ibeta as a corepressor to maintain histones in a hypoacetylated, repressed state.