Epicardin/capsulin/Pod-1, expressed in skeletal myoblasts within brachial arches and in the condensing mesenchyme, is a member of the basic helix-loop-helix (bHLH) transcription factor family that is involved in various cell differentiation processes. In this study, we examined the functional properties of epicardin/capsulin/Pod-1 in differentiation. The yeast and mammalian two-hybrid systems showed physical associations between epicardin/capsulin/Pod-1 and E2A, both of which were present in the nuclei. The bHLH domains mediated this association. Ectopic expression of epicardin/capsulin/Pod-1 inhibited E2A-dependent activation of the exogenous and endogenous expression of the cyclin-dependent kinase inhibitor, p21(WAF1/Cip1) gene, and the muscle creatine kinase gene that encodes the predominant creatine kinase isoform expressed in mammalian skeletal muscle. Transfection with epicardin/capsulin/Pod-1 small interfering RNA abolished the epicardin/capsulin/Pod-1-mediated suppression of E12-dependent activation of the p21 promoter. Chromatin immunoprecipitation assay showed that epicardin/capsulin/Pod-1 was physically associated with the muscle creatine kinase promoter in vivo. Moreover, terminal differentiation of C2C12 myoblasts was inhibited by exogenous introduction of epicardin/capsulin/Pod-1. These inhibitory functions of epicardin/capsulin/Pod-1 closely resemble those of the bHLH inhibitor Twist protein. These results indicate that epicardin/capsulin/Pod-1 functions as a negative regulator of differentiation of myoblasts through transcription in at least two distinct steps, cell growth arrest and lineage-specific differentiation.