Notch is the receptor for a conserved signaling pathway that regulates numerous cell fate decisions during development [1]. Signal transduction involves the presenilin-dependent intracellular processing of Notch and the nuclear translocation of the intracellular domain of Notch, NICD [2-6]. NICD associates with Suppressor of Hairless [Su(H)], a DNA binding protein, and Mastermind (Mam), a transcriptional coactivator [7-9]. In the absence of Notch signaling, Su(H) acts as a transcriptional repressor [10, 11]. Repression by Su(H) is relieved by the activation of Notch [12-16]. In the Drosophila embryo, this transcriptional switch from repression to activation is important for patterning the expression of the single-minded (sim) gene along the dorsoventral axis [12]. Here, we investigate the mechanisms by which Su(H) inhibits the expression of Notch target genes in Drosophila. We show that Hairless, an antagonist of Notch signaling [17-19], is required to repress the transcription of the sim gene. Hairless forms a DNA-bound complex with Su(H). Furthermore, it directly binds the Drosophila C-terminal Binding Protein (dCtBP), which acts as a transcriptional corepressor. The dCtBP binding motif of Hairless is essential for the function of Hairless in vivo. We propose that Hairless mediates transcriptional repression by Su(H) via the recruitment of dCtBP.