Spinocerebellar ataxia type 7 (SCA7) is an inherited neurodegenerative disorder caused by expansion of a polyglutamine tract in the ataxin-7 protein. A unique feature of SCA7 is degeneration of photoreceptor cells in the retina, resulting in cone-rod dystrophy. In an SCA7 transgenic mouse model that we developed, it was found that the cone-rod dystrophy involves altered photoreceptor gene expression due to interference with Crx, a homeodomain transcription factor containing a glutamine-rich region. To determine the basis of the Crx-ataxin-7 interaction, Crx and ataxin-7 truncation and point mutants were generated, and the ability of mutant versions of either protein to co-immunoprecipitate the normal version of the other protein was tested. Thus Crx's ataxin-7 interaction domain was localized to its glutamine-rich region and ataxin-7's Crx binding domain was mapped to its glutamine tract. The importance of each protein's respective glutamine region for a productive interaction was confirmed by performing Crx transactivation assays in HEK293 cells and correlating the extent of Crx transcription interference with the intactness of each protein's glutamine region. It was also established that ataxin-7 must localize to the nucleus to repress Crx transactivation, and the likely nuclear localization signals were mapped to ataxin-7's carboxy-terminal region. Finally, using chromatin immunoprecipitation, it was demonstrated that Crx and ataxin-7 engage in a functionally significant interaction by co-occupying the promoter and enhancer regions of Crx-regulated retinal genes in vivo. The results suggest that one mechanism of SCA7 disease pathogenesis is transcription dysregulation, and that Crx transcription interference is a predominant factor in SCA7 cone-rod dystrophy retinal degeneration.