The transcriptional activity of nuclear hormone receptors is known to be modulated by coregulator proteins. We found that the repressor of estrogen receptor activity (REA), a protein recruited to the hormone-occupied estrogen receptor (ER), decreased the transcriptional activity of ER, both when ER was acting directly through DNA response elements as well as when it was tethered to other transcription factors. Administration of antisense REA resulted in a 2-4-fold increase in ER transactivation, implying that endogenous REA normally dampens the stimulatory response to estradiol. To define the interaction regions between ER and REA, we used glutathione S-transferase pull-down assays. We found that REA bound to the ligand-binding domain (E domain) of ER, but not to other regions of ER, and that REA interaction with ER involved a region in the C-terminal half of REA. REA and the coactivator SRC-1 were involved in a functional competition for regulation of ER transcriptional activity, which we show results from competition between these two coregulators for interaction with ER. REA contains an LXXLL motif near its N terminus, but this motif was not involved in its binding to ER. Rather, this sequence was required for the competitive binding of REA and SRC-1 to ER and thus for optimal repression of ER activity. Our findings show that the regions of REA required for its interaction with ER and for its repression of ER activity are different.