SUT1 is a hypoxic gene encoding a nuclear protein that belongs to the Zn[II]2Cys-6 family. It has been shown that constitutive expression of SUT1 induces exogenous sterol uptake in aerobically growing Saccharomyces cerevisiae cells. A differential display approach was used to identify genes whose transcription is modified upon SUT1 induction. Within the promoter sequence of one of these genes, DAN1, we identified the region responsive to SUT1 and showed that it has a strong repressive activity when cloned in the vicinity of distinct promoters. Upon SUT1 constitutive expression in aerobiosis, the repression is released, allowing enhanced transcription of the reporter gene. We provide evidence that the repression is promoted by the Cyc8p(Ssn6p)-Tup1p co-repressor and that release of repression is the result of a physical interaction between Sut1p and Cyc8p. Moreover, genetic data suggest that complete derepression of the reporter gene requires a functional Cyc8p. In addition, we show that Sut1p is involved in the induction of hypoxic gene transcription when the cells are shifted from aerobiosis to anaerobiosis.