The centromere (CEN) DNA-kinetochore complex is the specialized chromatin structure that mediates chromosome attachment to the spindle and is required for high-fidelity chromosome segregation. Although kinetochore function is conserved from budding yeast to humans, it was thought that transcription had no role in centromere function in budding yeast, in contrast to other eukaryotes including fission yeast. We report here that transcription at the centromere facilitates centromere activity in the budding yeast Saccharomyces cerevisiae. We identified transcripts at CEN DNA and found that Cbf1, which is a transcription factor that binds to CEN DNA, is required for transcription at CEN DNA. Chromosome instability of cbf1Δ cells is suppressed by transcription driven from an artificial promoter. Furthermore, we have identified Ste12, which is a transcription factor, and Dig1, a Ste12 inhibitor, as a novel CEN-associated protein complex by an in vitro kinetochore assembly system. Dig1 represses Ste12-dependent transcription at the centromere. Our studies reveal that transcription at the centromere plays an important role in centromere function in budding yeast.