Exon 3 of the rat α-tropomyosin (Tpm1) gene is repressed in smooth muscle cells, allowing inclusion of the mutually exclusive partner exon 2. Two key types of elements affect repression of exon 3 splicing: binding sites for polypyrimidine tract-binding protein (PTB) and additional negative regulatory elements consisting of clusters of UGC or CUG motifs. Here, we show that the UGC clusters are bound by muscleblind-like proteins (MBNL), which act as repressors of Tpm1 exon 3. We show that the N-terminal region of MBNL1, containing its four CCCH zinc-finger domains, is sufficient to mediate repression. The same region of MBNL1 can make a direct protein-to-protein interaction with PTB, and RNA binding by MBNL promotes this interaction, apparently by inducing a conformational change in MBNL. Moreover, single molecule analysis showed that MBNL-binding sites increase the binding of PTB to its own sites. Our data suggest that the smooth muscle splicing of Tpm1 is mediated by allosteric assembly of an RNA-protein complex minimally comprising PTB, MBNL and their cognate RNA-binding sites.