Hox factors are evolutionarily conserved homeodomain-containing transcription factors that activate and repress gene expression in a precise temporally and spatially regulated manner during development and differentiation. Pancreatic-duodenal homeobox 1 (PDX-1) is a Hox-type protein that is a critical requirement for normal pancreas development and for proper differentiation of the endocrine pancreas. In humans, PDX-1 gene mutation causes pancreatic agenesis and early- and late-onset type 2 diabetes. PDX-1 consists of an N-terminal transactivation domain, a homeodomain responsible for DNA binding and nuclear localization, and a conserved C terminus that is mutated in human diabetes but whose function is poorly understood. We have identified a novel POZ domain protein, PDX-1 C terminus-interacting factor 1 (PCIF1)/SPOP, that interacts with PDX-1 both in vitro and in vivo. PCIF1 is localized to the nucleus in a speckled pattern, and coexpression of PDX-1 alters the subnuclear distribution of PCIF1. Functionally, PCIF1 inhibits PDX-1 transactivation of established target gene promoters in a specific and dose-dependent manner that requires critical amino acids in the PDX-1 C terminus. PCIF1 is expressed in adult pancreatic insulin-producing beta cells, and overexpression of PCIF1 inhibits the rat insulin 1 and rat insulin 2 promoters in the MIN6 insulinoma beta cell line. The coexpression of PCIF1 with PDX-1 in beta cells and the ability of PCIF1 to repress PDX-1 transactivation suggest that modulation of PDX-1 function by PCIF1 may regulate normal beta cell differentiation.