Groucho (Gro) is a Drosophila melanogaster transcriptional corepressor that 
directly interacts with the histone deacetylase Rpd3. Although previous studies 
suggest that this interaction is required for repression of Gro-responsive 
reporters in cultured cells, the in vivo significance of this interaction and 
the mechanism by which it leads to repression remain largely unexplored. In this 
study, we show that Gro is partially dependent on Rpd3 for repression, 
supporting the idea that Rpd3-mediated repression is one mode of Gro-mediated 
repression. We demonstrate that Gro colocalizes with Rpd3 to the chromatin of a 
target gene and that this is accompanied by the deacetylation of specific 
lysines within the N-terminal tails of histones H3 and H4. Gro overexpression 
leads to wing patterning defects and ectopic repression in the wing disc of 
transcription directed by the vestigial quadrant enhancer. These effects are 
reversed by the histone deacetylase inhibitors TSA and HC-Toxin and by the 
reduction of Rpd3 gene dosage. Furthermore, repression of the vestigial quadrant 
enhancer is accompanied by a Gro-mediated increase in nucleosome density, an 
effect that is reversed by histone deacetylase inhibitors. We propose a model in 
which Gro-mediated histone deacetylation results in increased nucleosome density 
leading to transcriptional repression.