The ubiquitous and constitutive octamer transcription factor OTF-1 (Oct 1) is the target of positive regulation by the potent herpes simplex virus trans-activator VP16, which forms a complex with the homeodomain of OTF-1. Here we present evidence that the glucocorticoid receptor can negatively regulate OTF-1 function by a mechanism that is independent of DNA binding. In vivo-expressed glucocorticoid receptor inhibited in a hormone-dependent manner activation of a minimal promoter construct carrying a functional octamer site. Moreover, expression of the receptor in vivo resulted in hormone-dependent repression of OTF-1-dependent DNA-binding activity in nuclear extract. In vitro, the DNA-binding activity of partially purified OTF-1 was repressed following incubation with purified glucocorticoid receptor. Cross-linking and immunoprecipitation experiments indicated that the functional interference may be due to a strong association between these two proteins in solution. Finally, preliminary evidence indicates that the homeo subdomain of OTF-1 that directs formation of a complex with VP16 may also be critical for interaction with the glucocorticoid receptor. Thus, OTF-1 is a target for both positive and negative regulation by protein-protein interaction. Moreover, the functional interference between OTF-1 and the glucocorticoid receptor represents a novel regulatory mechanism in the cross-coupling of signal transduction pathways of nuclear receptors and constitutive transcription factors.