In normal cells p53 activity is tightly controlled and MDM2 is a known negative regulator. Here we show that via its acidic domain, Daxx binds to the COOH-terminal domain of p53, whose positive charges are critical for this interaction, as Lys to Arg mutations preserved, but Lys to Ala or Ser to Glu mutations abolished Daxx-p53 interaction. These results thus implicate acetylation and phosphorylation of p53 in regulating its binding to Daxx. Interestingly, whereas Daxx did not bind to p53 in cells as assessed by immunoprecipitation, MDM2 expression restored p53-Daxx interaction, and this correlated with deacetylation of p53. In p53/MDM2-null mouse embryonic fibroblasts (DKO MEF), Daxx repressed p53 target promoters whose p53-binding elements were required for the repression. Coexpression of Daxx and MDM2 led to further repression. p53 expression in DKO MEF induced apoptosis and Daxx expression relieved this effect. Similarly, in HCT116 cells, Daxx conferred striking resistance to 5-fluorouracil-induced apoptosis. As p53 is required for 5-fluorouracil-induced cell death, our data show that Daxx can suppress cell death induced by p53 overexpression and p53-dependent stress response. Collectively, our data reveal Daxx as a novel negative regulator of p53. Importantly, posttranslational modifications of p53 inhibit Daxx-p53 interaction, thereby relieving negative regulation of p53 by Daxx.