The Wilms tumor suppressor protein, WT1, is a transcription factor capable of activating or repressing transcription of various cellular genes. The mechanisms involved in regulating the transcriptional activities of WT1 are beginning to be unraveled. It appears that physical interactions of other cellular proteins (p53 and par-4) with WT1 can modulate the function of WT1. Here, we report the identification and cloning of a novel WT1-interacting protein termed Ciao 1, a member of the WD40 family of proteins. Ciao 1 specifically interacts with WT1 both in vitro and in vivo. This interaction alters the mobility of a WT1.DNA complex in gel shift assays, and results in a decrease in transcriptional activation mediated by WT1. Ciao 1 does not inhibit binding of WT1 to its consensus nucleotide sequence and does not affect the repression activity of WT1. Thus, Ciao 1 appears to specifically modulate the transactivation activity of WT1 and may function to regulate the physiological functions of WT1 in cell growth and differentiation.