Transcription by RNA polymerase II in Saccharomyces cerevisiae and in humans is widespread, even in genomic regions that do not encode proteins. The purpose of such intergenic transcription is largely unknown, although it can be regulatory. We have discovered a role for one case of intergenic transcription by studying the S. cerevisiae SER3 gene. Our previous results demonstrated that transcription of SER3 is tightly repressed during growth in rich medium. We now show that the regulatory region of this gene is highly transcribed under these conditions and produces a non-protein-coding RNA (SRG1). Expression of the SRG1 RNA is required for repression of SER3. Additional experiments have demonstrated that repression occurs by a transcription-interference mechanism in which SRG1 transcription across the SER3 promoter interferes with the binding of activators. This work identifies a previously unknown class of transcriptional regulatory genes.