Transcriptional repression activity of PAX3 is modulated by competition between corepressor KAP1 and heterochromatin protein 1

Pax3 is a transcription factor crucial for normal development and tumorigenesis. Pax3 has been known to cause Waardenburg syndrome and pediatric alveolar rhabdomyosarcoma, but how Pax3 regulates transcription is not clear. Here, we report that Pax3 represses transcription and selectively interacts with heterochromatin protein 1 (HP1) and KAP1. KAP1 functions as a transcriptional corepressor by recruiting HP1 to facilitate the formation of a closed chromatin through histone deacetylation and methylation. We found that KAP1 is a corepressor for Pax3 by augmenting the repressional activity of Pax3. Unexpectedly, HP1γ diminishes the repressional activity of Pax3. On target promoters, KAP1 and HP1γ compete for binding with Pax3 on the N-terminal paired domain, and the C-terminal domain of Pax3 governs the subcellular localization of Pax3. Taken together, our results indicate that Pax3 represses transcription through a novel mechanism involving competition between corepressor KAP1 and the heterochromatin-binding protein HP1γ.