Melatonin is an indole hormone produced mainly by the pineal gland. We have previously demonstrated that melatonin interferes with estrogen (E(2)) signaling in MCF7 cells by impairing estrogen receptor (ER) pathways. Here we present the characterization of its mechanism of action showing that melatonin is a specific inhibitor of E(2)-induced ERalpha-mediated transcription in both estrogen response element- and AP1-containing promoters, whereas ERbeta-mediated transactivation is not inhibited or even activated at certain promoters. We show that the sensitivity of MCF-7 cells to melatonin depends on the ERalpha/ERbeta ratio, and ectopic expression of ERbeta results in MCF-7 cells becoming insensitive to this hormone. Melatonin acts as a calmodulin antagonist inducing conformational changes in the ERalpha-calmodulin (CaM) complex, thus impairing the binding of E(2).ERalpha.CaM complex to DNA and, therefore, preventing ERalpha-dependent transcription. Moreover the mutant ERalpha (K302G,K303G), unable to bind calmodulin, becomes insensitive to melatonin. The effect of melatonin is specific since other related indoles neither interact with CaM nor inhibit ERalpha-mediated transactivation. Interestingly, melatonin does not affect the binding of coactivators to ERalpha, indicating that melatonin action is different from that of current therapeutic anti-estrogens used in breast cancer therapy. Thus, they target ERalpha at different levels, representing two independent ways to control ERalpha activity. It is, therefore, conceivably a synergistic pharmacological effect of melatonin and current anti-estrogen drugs.