A number of genes, spanning the evolutionary scale from yeast to mammals, that are involved in spatial and temporal patterning during development contain zinc finger and homeodomain motifs. One such zinc finger/homeodomain protein is Drosophila Zfh-1, a member of the zfh family of Drosophila genes, which is expressed in muscle precursors and is critical for the proper development of muscle. Here we demonstrate that a vertebrate homolog of Zfh-1 (ZEB) is a negative regulator of muscle differentiation. We show that ZEB binds to a subset of E boxes in muscle genes and functions by actively repressing transcription. One target of this repression is the members of the MEF-2 family, which synergize with proteins of the myogenic basic helix-loop-helix family (bHLH) (myoD, myf-5, myogenin and MRF-4) to induce myogenic differentiation. As muscle differentiation proceeds, myogenic bHLH proteins accumulate to levels sufficient to displace ZEB from the E boxes, releasing the repression and allowing bHLH proteins to further activate transcription. This mechanism of active transcriptional repression distinguishes ZEB from other negative regulators of myogenesis (Id, Twist and I-mfa) that inhibit muscle differentiation by simply binding and inactivating myogenic factors. The relative affinity of ZEB versus myogenic bHLH proteins varies for E boxes in different genes such that ZEB would be displaced from different genes at distinct times as myogenic bHLH proteins accumulate during myogenesis, thus providing a mechanism to regulate temporal order of gene expression.