Regulation of mammalian mtDNA gene expression is critical for altering oxidative phosphorylation capacity in response to physiological demands and disease processes. The basal machinery for initiation of mtDNA transcription has been molecularly defined, but the mechanisms regulating its activity are poorly understood. In this study, we show that MTERF3 is a negative regulator of mtDNA transcription initiation. The MTERF3 gene is essential because homozygous knockout mouse embryos die in midgestation. Tissue-specific inactivation of MTERF3 in the heart causes aberrant mtDNA transcription and severe respiratory chain deficiency. MTERF3 binds the mtDNA promoter region and depletion of MTERF3 increases transcription initiation on both mtDNA strands. This increased transcription initiation leads to decreased expression of critical promoter-distal tRNA genes, which is possibly explained by transcriptional collision on the circular mtDNA molecule. To our knowledge, MTERF3 is the first example of a mitochondrial protein that acts as a specific repressor of mammalian mtDNA transcription initiation in vivo.