SNF2-like motor proteins, such as ISWI, cooperate with histone chaperones in the assembly and remodeling of chromatin. Here we describe a novel, evolutionarily conserved, ISWI-containing complex termed ToRC (Toutatis-containing chromatin remodeling complex). ToRC comprises ISWI, Toutatis/TIP5 (TTF-I-interacting protein 5), and the transcriptional corepressor CtBP (C-terminal-binding protein). ToRC facilitates ATP-dependent nucleosome assembly in vitro. All three subunits are required for its maximal biochemical activity. The toutatis gene exhibits strong synthetic lethal interactions with CtBP. Thus, ToRC mediates, at least in part, biological activities of CtBP and Toutatis. ToRC subunits colocalize in euchromatic arms of polytene chromosomes. Furthermore, nuclear localization and precise distribution of ToRC in chromosomes are dependent on CtBP. ToRC is involved in CtBP-mediated regulation of transcription by RNA polymerase II in vivo. For instance, both Toutatis and CtBP are required for repression of genes of a proneural gene cluster, achaete-scute complex (AS-C), in Drosophila larvae. Intriguingly, native C-terminally truncated Toutatis isoforms do not associate with CtBP and localize predominantly to the nucleolus. Thus, Toutatis forms two alternative complexes that have differential distribution and can participate in distinct aspects of nuclear DNA metabolism.