Mutations in ZFHX1B cause Mowat-Wilson syndrome (MWS) but the precise mechanisms underlying the aberrant functions of mutant ZFHX1B proteins (also named Smad-interacting protein-1, SIP1) in patients are unknown. Using mass spectrometry analysis, we identified subunits of the NuRD corepressor complex in affinity-purified Zfhx1b complexes. We find that Zfhx1b associates with NuRD through its N-terminal domain, which contains a previously postulated NuRD interacting motif. Interestingly, this motif is substituted by an unrelated sequence in a recently described MWS patient. We show here that such aberrant ZFHX1B protein is unable to recruit NuRD subunits and displays reduced transcriptional repression activity on the XBMP4 gene promoter, a target of Zfhx1b. We further demonstrate that the NuRD component Mi-2beta is involved in repression of the Zfhx1b target gene E-cadherin as well as in Zfhx1b-induced neural induction in animal caps from Xenopus embryos. Thus, NuRD and Zfhx1b functionally interact, and defective NuRD recruitment by mutant human ZFHX1B can be a MWS-causing mechanism. This is the first study providing mechanistic insight into the aberrant function of a single domain of the multi-domain protein ZFHX1B/SIP1 in human disease.