Coregulator proteins, coactivators and corepressors, have a profound influence on steroid receptor activity and play a role in regulating receptor levels. To identify novel coregulators of nuclear receptors, we used the ligand-binding and hinge region of ERalpha as bait in a yeast two-hybrid screen of a cDNA library derived from rat uterine luminal epithelium. We report the cloning and characterization of a cDNA encoding a protein homologous to yeast and human ubiquitin-activating enzyme 3 (Uba3), the catalytic subunit of the activating enzyme of the ubiquitin-like NEDD8 (neural precursor cellexpressed developmentally down-regulated) conjugation pathway (known as neddylation). Sequence analysis revealed that Uba3 contains multiple nuclear receptor (NR)-interacting motifs (NR boxes), which are known to mediate interactions between coregulatory proteins and ligand-activated NRs. Yeast two-hybrid and glutathione-S-transferase pull-down assays demonstrated that Uba3 directly interacts with ligand-occupied ERalpha and ERbeta. Transient transfection of Uba3 in mammalian cells inhibited ER-mediated transactivation in a time-dependent fashion; Uba3 had no effect on the initial events of transcriptional activation by liganded ER, but it blocked the progressive increase in target gene expression during continuous stimulation. Uba3 also inhibited transactivation by AR and PR in mammalian cells but had no effect on a steroid receptor-independent transactivation pathway. An enzymatically silent form of Uba3 did not inhibit ER-induced transcription, and a Uba3-binding fragment of amyloid precursor protein-binding protein, the other subunit of the NEDD8-activating enzyme, partially overcame Uba3-mediated inhibition, demonstrating that the neddylation activity of Uba3 is required for its inhibition of steroid receptor transactivation. Thus, Uba3 inhibits transcription induced by steroid hormone receptors through a novel mechanism that involves the neddylation pathway. Understanding the mechanisms controlling hormone responsiveness of target tissues, such as the uterus and mammary gland, may lead to novel insights of therapeutic intervention.