Death domain-associated protein (Daxx) is a multi-functional protein that modulates both apoptosis and transcription. Within the nucleus, Daxx is a component of the promyelocytic leukemia protein (PML) nuclear bodies (NBs) and interacts with a number of transcription factors, yet its precise role in transcription remains elusive. To further define the function of Daxx, we have isolated its interacting proteins in the nucleus using epitope-tagged affinity purification and identified X-linked mental retardation and alpha-thalassaemia syndrome protein (ATRX), a putative member of the SNF2 family of ATP-dependent chromatin remodeling proteins that is mutated in several X-linked mental retardation disorders. We show that substantial amounts of endogenous Daxx and ATRX exist in a nuclear complex. Daxx binds to ATRX through its paired amphipathic alpha helices domains. ATRX has ATPase activity that is stimulated by mononucleosomes, and patient mutations in the ATPase domain attenuate this activity. ATRX strongly represses transcription when tethered to a promoter. Daxx does not affect the ATPase activity of ATRX, however, it alleviates its transcription repression activity. In addition, ATRX is found in the PML-NBs, and this localization is mediated by Daxx. These results show that the ATRX.Daxx complex is a novel ATP-dependent chromatin-remodeling complex, with ATRX being the core ATPase subunit and Daxx being the targeting subunit. Moreover, the localization of ATRX to the PML-NBs supports the notion that these structures may play an important role in transcription regulation.