Transcription is regulated by a multitude of activators and repressors, which bind to the RNA polymerase II (Pol II) machinery and modulate its progression. Death-inducer obliterator 3 (DIDO3) and PHD finger protein 3 (PHF3) are paralogue proteins that regulate transcription elongation by docking onto phosphorylated serine-2 in the C-terminal domain (CTD) of Pol II through their SPOC domains. Here, we show that DIDO3 and PHF3 form a complex that bridges the Pol II elongation machinery with chromatin and RNA processing factors and tethers Pol II in a phase-separated microenvironment. Their SPOC domains and C-terminal intrinsically disordered regions are critical for transcription regulation. PHF3 and DIDO exert cooperative and antagonistic effects on the expression of neuronal genes and are both essential for neuronal differentiation. In the absence of PHF3, DIDO3 is upregulated as a compensatory mechanism. In addition to shared gene targets, DIDO specifically regulates genes required for lipid metabolism. Collectively, our work reveals multiple layers of gene expression regulation by the DIDO3 and PHF3 paralogues, which have specific, co-regulatory and redundant functions in transcription.
© 2023. The Author(s).