The glucocorticoid receptor (GR) mediates virtually all actions of glucocorticoids, and the nature and magnitude of a cell's response to these steroids are determined primarily by hormone concentration and GR signaling capacity. DAX-1 is an orphan nuclear receptor that functions as a corepressor and deletion or mutation of DAX-1 also causes a decrease in glucocorticoid production. However it is unclear if DAX-1 also alters GR function as a transcription factor. Here, we demonstrate that DAX-1 acts as a novel selective GR modulator. It specifically inhibits ligand-dependent GR transactivation with little effect on GR-mediated transrepression. As demonstrated by co-immunoprecipitation and glutathione-S-transferase pull down assays, DAX-1 physically interacts with GR, but this interaction does not influence either ligand-induced GR nuclear translocation or subsequent GR association with glucocorticoid responsive elements. Instead, DAX-1 competes with coactivators such as GRIP1 for binding to the receptor. Specifically, suppression of GR transactivation is mediated by the N-terminal half of DAX-1, and in particular the LXXLL motifs. Thus we demonstrate that DAX-1 directly modulates GR signaling in addition to affecting glucocorticoid hormone levels.