A good model system to examine aspects of positive and negative transcriptional regulation is the muscle-specific regulatory factor, MyoD, which is a basic helix-loop-helix (bHLH) transcription factor. Although MyoD has the ability to induce skeletal muscle terminal differentiation in a variety of non-muscle cell types, MyoD activity itself is highly regulated through protein-protein interactions involving several different co-factors. Here we describe the characterization of a novel bHLH protein, Mist1, and how it influences MyoD function. We show that Mist1 accumulates in myogenic stem cells (myoblasts) and then decreases as myoblasts differentiate into myotubes. Mist1 functions as a negative regulator of MyoD activity, preventing muscle differentiation and the concomitant expression of muscle-specific genes. Mist1-induced inhibition occurs through a combination of mechanisms, including the formation of inactive MyoD-Mist1 heterodimers and occupancy of specific E-box target sites by Mist1 homodimers. Mist1 lacks a classic transcription activation domain and instead possesses an N-terminal repressor region capable of inhibiting heterologous activators. Thus, Mist1 may represent a new class of repressor molecules that play a role in controlling the transcriptional activity of MyoD, ensuring that expanding myoblast populations remain undifferentiated during early embryonic muscle formation.