We have used an interaction cloning strategy to identify an inhibitory isoform of the ITF-2 transcription factor, ITF-2b, that interacts with the transcriptional inhibitor Id3/HLH462. The interaction was confirmed in vitro, and inside intact myogenic C2C12 cells. As expected, overexpression of either Id3/HLH462 or ITF-2b effectively inhibited the activation of the muscle-specific creatine kinase promoter by the myogenic transcription factor MyoD. However, when overexpressed simultaneously, ITF-2b and Id3/HLH462 counteracted each other's inhibitory effect to produce a reduced overall inhibition. Moreover, while ITF-2b inhibited the creatine kinase promoter, it acted as a weak transactivator on an artificial promoter consisting of three tandem copies of the consensus myogenic factor DNA binding site. Further investigation indicated that the ITF-2b/MyoD heterodimer bound to its specific DNA binding site in vitro, and the DNA binding was effectively blocked by Id3/HLH462. Additional analysis revealed the presence of transcripts for both the activating (ITF-2a) and inhibitory (ITF-2b) isoforms in differentiating C2C12 cultures, suggesting that both isoforms might participate in regulating the differentiation process. Taken together, this study reveals a more complex pattern of regulatory interactions involving the helix-loop-helix proteins than was previously anticipated.