Many aspects of neurogenesis and neuronal differentiation are controlled by basic helix-loop-helix (bHLH) proteins. One such factor is SHARP-1, initially identified on the basis of its sequence similarity to hairy. Unlike hairy, and atypically for bHLHs, SHARP-1 is expressed late in development, suggestive of a role in terminal aspects of differentiation. Nevertheless, the role of SHARP-1 and the identity of its target genes remain unknown. During the course of a one-hybrid screen for transcription factors that bind to regulatory domains of the M1 muscarinic acetylcholine receptor gene, we isolated the bHLH transcription factor SHARP-1. In this study, we investigated the functional role of SHARP-1 in regulating transcription. Fusion proteins of SHARP-1 tethered to the gal4 DNA binding domain repress both basal and activated transcription when recruited to either a TATA-containing or a TATAless promoter. Furthermore, we identified two independent repression domains that operate via distinct mechanisms. Repression by a domain in the C terminus is sensitive to the histone deacetylase inhibitor trichostatin A, whereas repression by the bHLH domain is insensitive to TSA. Furthermore, overexpression of SHARP-1 represses transcription from the M(1) promoter. This study represents the first report to assign a function to, and to identify a target gene for, the bHLH transcription factor SHARP-1.