A transcriptional repressor complex encoded by two essential genes, YDR1 and BUR6, was isolated from Saccharomyces cerevisiae and shown to be the functional counterpart of the human repressor complex Dr1-DRAP1. To elucidate the mechanism of repression by this complex, altered forms of Ydr1 and Bur6 were studied in vitro and in vivo. Deletion of the C-terminal 41 amino acids of Ydr1 resulted in loss of repressor activity and a growth defect, suggesting that the C-terminal domain of Ydr1 functions as a potent transcriptional repressor. A screen for extragenic suppressors of a cold-sensitive ydr1 (ydr1(cs)) mutant led to the identification of recessive mutations in the SIN4 gene, which encodes a component of the SRB-MED complex. The sin4 alleles suppressed not only ydr1(cs) mutations but also bur6(cs) mutations. In contrast, deletion of the gal11 gene, whose product is also a member of the SRB-MED complex, failed to suppress ydr1(cs) and bur6(cs) mutations, indicating that suppression is not due to general defects in the SRB-MED complex. Moreover, one of the sin4 alleles, but not the sin4 deletion, was found to specifically suppress the inviability of a ydr1 deletion, demonstrating that the essential function of Ydr1 becomes dispensable in a sin4 mutant background. Biochemical analysis of the SRB-MED complex from the sin4 suppressor strain revealed a structurally distinct form of the SRB-MED complex that lacks a subset of mediator subunits. These results define a delicate balance between positive and negative regulators of transcription operating through the Ydr1-Bur6 repressor complex.