Notch proteins are transmembrane receptors that mediate intercell communication and direct individual cell fate decisions. The activated intracellular form of Notch, NotchIC, translocates to the nucleus, where it targets the DNA binding protein CBF1. CBF1 mediates transcriptional repression through the recruitment of an SMRT-histone deacetylase-containing corepressor complex. We have examined the mechanism whereby NotchIC overcomes CBF1-mediated transcriptional repression. We identified SKIP (Ski-interacting protein) as a CBF1 binding protein in a yeast two-hybrid screen. Both CBF1 and SKIP are highly conserved evolutionarily, and the SKIP-CBF1 interaction is also conserved in assays using the Caenorhabditis elegans and Drosophila melanogaster SKIP homologs. Protein-protein interaction assays demonstrated interaction between SKIP and the corepressor SMRT. More surprisingly, SKIP also interacted with NotchIC. The SMRT and NotchIC interactions were mutually exclusive. In competition binding experiments SMRT displaced NotchIC from CBF1 and from SKIP. Contact with SKIP is required for biological activity of NotchIC. A mutation in the fourth ankyrin repeat that abolished Notch signal transduction did not affect interaction with CBF1 but abolished interaction with SKIP. Further, NotchIC was unable to block muscle cell differentiation in myoblasts expressing antisense SKIP. The results suggest a model in which NotchIC activates responsive promoters by competing with the SMRT-corepressor complex for contacts on both CBF1 and SKIP.