CTC-binding factor (CTCF) is a DNA-binding protein of vertebrates that plays essential roles in regulating genome activity through its capacity to act as an enhancer blocker. We performed a yeast two-hybrid screen to identify protein partners of CTCF that could regulate its activity. Using full-length CTCF as bait we recovered Kaiso, a POZ-zinc finger transcription factor, as a specific binding partner. The interaction occurs through a C-terminal region of CTCF and the POZ domain of Kaiso. CTCF and Kaiso are co-expressed in many tissues, and CTCF was specifically co-immunoprecipitated by several Kaiso monoclonal antibodies from nuclear lysates. Kaiso is a bimodal transcription factor that recognizes methylated CpG dinucleotides or a conserved unmethylated sequence (TNGCAGGA, the Kaiso binding site). We identified one consensus unmethylated Kaiso binding site in close proximity to the CTCF binding site in the human 5' beta-globin insulator. We found, in an insulation assay, that the presence of this Kaiso binding site reduced the enhancer-blocking activity of CTCF. These data suggest that the Kaiso-CTCF interaction negatively regulates CTCF insulator activity.