Regulation of prolactin gene transcription requires cooperative interactions between the pituitary-specific POU domain protein Pit-1 and members of the ETS transcription factor family. We demonstrate here that the ETS-2 repressor factor (ERF) is expressed in pituitary tumor cells and that overexpression of recombinant ERF inhibits prolactin promoter activity, but not the closely related growth hormone promoter. In non-pituitary cell lines, coexpression of ERF disrupts the cooperative interactions between Pit-1 and ETS-1 and blocks the induction of Pit-1-dependent prolactin promoter activity by cAMP. The potential role of ERF in the inhibitory response of the prolactin promoter to dopamine was examined using pituitary tumor cells stably expressing dopamine D2 receptors. The inhibitory responses of the prolactin promoter to ERF and dopamine are additive, suggesting that ERF has a complementary role in this hormonal response. A single Pit-1 DNA-binding element from the prolactin promoter is sufficient to reconstitute the inhibitory response to ERF. DNA binding analysis using either a composite Pit-1/ETS protein-binding site or a Pit-1 element with no known affinity for ETS proteins revealed that ERF interferes with Pit-1 binding. Together, these results demonstrate that ERF is a specific inhibitor of basal and hormone-regulated transcription of the prolactin gene and suggest a new level of complexity for the interaction of ETS factors with Pit-1 target genes.