Daxx has been reported to function as a transcriptional modulator in the nucleus. In the present study, we have explored the role of Daxx in regulating the transcriptional activity of the glucocorticoid receptor (GR). Overexpression of Daxx suppressed GR-mediated activation of the mouse mammary tumor virus promoter in COS-1, HeLa, and 293T cells. In vitro and in vivo studies revealed that Daxx could directly bind to GR. The mapping analysis further demonstrated that the C-terminal region of Daxx-(501-740) mediates the interaction and transcriptional repression of GR. The repressive effect of Daxx and Daxx-(501-740) on GR could be alleviated by co-expression of promyelocytic leukemia protein (PML). Furthermore, immunofluorescence analysis showed that overexpression of wild-type PML results in the translocation of Daxx and Daxx-(501-740) to the PML oncogenic domains (PODs). By contrast, a PML sumoylation-defective mutant failed to recruit Daxx to PODs and to reverse the Daxx repression effect on GR. Accordingly, As(2)O(3) treatment rendered the sequestration of endogenous Daxx to the PODs, leading to an enhancement of GR transactivation in COS-1 cells. Taken together, these findings suggest that recruitment of Daxx into the subnuclear POD structures sequesters it from the GR/co-activators complex, thereby alleviating its repressive effects. Our present studies provide the important link between Daxx/PML interaction and GR transcriptional activation.