We previously demonstrated that the Groucho protein AES (amino-terminal enhancer of split) functions as a co-repressor of the AR (androgen receptor). It physically interacts with the N-terminal domain of AR and inhibits AR-driven transcription, but the molecular mechanism of its action remained unclear. In the present paper we report that the AES protein contains one inhibitory domain, and one positive and one negative regulatory domain. The negative regulatory domain inhibits AES dimerization and AES-mediated inhibition of AR-driven transcription through an interaction with the inhibitory domain. The positive regulatory domain blocked this interaction and relieved the inhibitory effect. In addition, we discovered mechanisms by which AES regulates AR transcriptional activity, which included disruption of the interaction between the AR N-terminal and C-terminal domains, and inhibition of AR-DNA interaction. Although AES broadly inhibited the activity of androgen-dependent luciferase reporters in a transient transfection assay, it selectively regulated the expression of endogenous androgen-dependent genes in prostate cancer cells.