The homeodomain protein TGIF represses transcription in part by recruiting histone deacetylases. TGIF binds directly to DNA to repress transcription or interacts with TGF-beta-activated Smads, thereby repressing genes normally activated by TGF-beta. Loss of function mutations in TGIF result in holoprosencephaly (HPE) in humans. One HPE mutation in TGIF results in a single amino acid substitution in a conserved PLDLS motif within the amino-terminal repression domain. We demonstrate that TGIF interacts with the corepressor carboxyl terminus-binding protein (CtBP) via this motif. CtBP, which was first identified by its ability to bind the adenovirus E1A protein, interacts both with gene-specific transcriptional repressors and with a subset of polycomb proteins. Efficient repression of TGF-beta-activated gene responses by TGIF is dependent on interaction with CtBP, and we show that TGIF is able to recruit CtBP to a TGF-beta-activated Smad complex. Disruption of the PLDLS motif in TGIF abolishes the interaction of CtBP with TGIF and compromises the ability of TGIF to repress transcription. Thus, at least one HPE mutation in TGIF appears to prevent CtBP-dependent transcriptional repression by TGIF, suggesting an important developmental role for the recruitment of CtBP by TGIF.