Daxx inhibits muscle differentiation by repressing E2A-mediated transcription.

The basic helix-loop-helix (HLH) E2A transcription factors bind to DNA as homodimers or as heterodimers formed with other basic HLH factors, activate gene expression, and promote differentiation of muscle, lymphoid, neuronal, and other cell types. These E2A functions can be inhibited by the Id proteins, HLH factors that sequester E2A in non-DNA binding dimers. Here we describe the direct interaction of E2A with Daxx, a broadly expressed non-HLH protein previously associated with apoptosis and transcriptional repression. Daxx inhibits E2A function, but not via an Id-like mechanism; rather, it recruits histone deacetylase activity to E2A-dependent promoters. Increased Daxx expression during muscle differentiation inhibits E2A-dependent expression of key myogenic genes and reduces myotube formation, while decreased Daxx expression promotes myotube formation. These results identify a new mechanism for limiting E2A activity and establish a link between Daxx-mediated gene regulation and control of cellular differentiation.