Transcription factors belonging to the basic helix-loop-helix (bHLH) family are involved in various cell differentiation processes. We report the isolation and functional characterization of a novel bHLH factor, termed OUT. OUT, structurally related to capsulin/epicardin/Pod-1 and ABF-1/musculin/MyoR, is expressed mainly in the adult mouse reproductive organs, such as the ovary, uterus, and testis, and is barely detectable in tissues of developing embryos. Physical association of OUT with the E protein was predicted from the primary structure of OUT and confirmed by co-immunoprecipitation. However, unlike other bHLH factors, this novel protein failed to bind E-box or N-box DNA sequences and inhibited DNA binding of homo- and heterodimers consisting of E12 and MyoD in gel mobility shift assays. In luciferase assays, OUT inhibited the induction of E-box-dependent transactivation by MyoD-E12 heterodimers. Deletion studies identified the domain responsible for the inhibitory action of OUT in its bHLH and C-terminal regions. Moreover, terminal differentiation of C2C12 myoblasts was inhibited by exogenous introduction of OUT. These inhibitory functions of OUT closely resemble those of the helix-loop-helix inhibitor Id proteins. Based on these findings, we propose that this novel protein functions as a negative regulator of bHLH factors through the formation of a functionally inactive heterodimeric complex.