The transcriptional activity of the androgen receptor (AR) modulated by positive or negative regulators plays a critical role in controlling the growth and survival of prostate cancer cells. Although numerous positive regulators have been identified, negative regulators of AR are less well understood. We report here that Daxx functions as a negative AR coregulator through direct protein-protein interactions. Overexpression of Daxx suppressed AR-mediated promoter activity in COS-1 and LNCaP cells and AR-mediated prostate-specific antigen expression in LNCaP cells. Conversely, downregulation of endogenous Daxx expression by RNA interference enhances androgen-induced prostate-specific antigen expression in LNCaP cells. In vitro and in vivo interaction studies revealed that Daxx binds to both the amino-terminal and the DNA-binding domain of the AR. Daxx proteins interfere with the AR DNA-binding activity both in vitro and in vivo. Moreover, sumoylation of AR at its amino-terminal domain is involved in Daxx interaction and trans-repression. Together, these findings not only provide a novel role of Daxx in controlling AR transactivation activity but also uncover the mechanism underlying sumoylation-dependent transcriptional repression of the AR.