Dentatorubral-pallidoluysian atrophy is a progressive neurodegenerative disease caused by the expansion of a polyglutamine repeats within the Atrophin-1 protein. The in vivo function of Atrophin-1 is unknown. We have characterized a Drosophila gene encoding an Atrophin family protein. Analysis of mutant phenotypes indicates that Drosophila Atrophin is required in diverse developmental processes including early embryonic patterning. Drosophila Atrophin genetically interacts with the transcription repressor even-skipped and is required for its repressive function in vivo. Drosophila Atrophin directly binds to Even-skipped in vitro. Furthermore, both human Atrophin-1 and Drosophila Atrophin repress transcription in vivo when tethered to DNA, and poly-Q expansion in Atrophin-1 reduces this repressive activity. We propose that Atrophin proteins function as versatile transcriptional corepressors and discuss a model that deregulation of transcription may contribute to the pathogenesis of neurodegeneration.