Activation of the aryl hydrocarbon receptor (AHR) by 2,3,7,8-tetrachlorodibenzo-p-dioxin causes altered gene expression and toxicity. The AHR repressor (AHRR) inhibits AHR signaling through a proposed mechanism involving competition with AHR for dimerization with AHR nuclear translocator (ARNT) and binding to AHR-responsive enhancer elements (AHREs). We sought to delineate the relative roles of competition for ARNT and AHREs in the mechanism of repression. In transient transfections in which AHR2-dependent transactivation was repressed by AHRR1 or AHRR2, increasing ARNT expression failed to reverse the repression, suggesting that AHRR inhibition of AHR signaling does not occur through sequestration of ARNT. An AHRR1 point mutant (AHRR1-Y9F) that could not bind to AHREs but that retained its nuclear localization was only slightly reduced in its ability to repress AHR2, demonstrating that AHRR repression does not occur solely through competition for AHREs. When both proposed mechanisms were blocked (AHRR1-Y9F plus excess ARNT), AHRR remained functional. AHRR1 neither blocked AHR nuclear translocation nor reduced the levels of AHR2 protein. Experiments using AHRR1 C-terminal deletion mutants showed that amino acids 270 to 550 are dispensable for repression. These results demonstrate that repression of AHR transactivation by AHRR involves the N-terminal portion of AHRR; does not involve competition for ARNT; and does not require binding to AHREs, although AHRE binding can contribute to the repression. We propose a mechanism of AHRR action involving "transrepression" of AHR signaling through protein-protein interactions rather than by inhibition of the formation or DNA binding of the AHR-ARNT complex.