All cells must detect and respond to changes in their environment, often through changes in gene expression. The yeast pheromone pathway has been extensively characterized, and is an ideal system for studying transcriptional regulation. Here we combine computational and experimental approaches to study transcriptional regulation mediated by Ste12, the key transcription factor in the pheromone response. Our mathematical model is able to explain multiple counterintuitive experimental results and led to several novel findings. First, we found that the transcriptional repressors Dig1 and Dig2 positively affect transcription by stabilizing Ste12. This stabilization through protein-protein interactions creates a large pool of Ste12 that is rapidly activated following pheromone stimulation. Second, we found that protein degradation follows saturating kinetics, explaining the long half-life of Ste12 in mutants expressing elevated amounts of Ste12. Finally, our model reveals a novel mechanism for robust perfect adaptation through protein-protein interactions that enhance complex stability. This mechanism allows the transcriptional response to act on a shorter time scale than upstream pathway activity.