The expression of iron transport genes in Schizosaccharomyces pombe is controlled by the Fep1 transcription factor. When iron levels exceed those needed by the cells, Fep1 represses iron transport genes. In contrast, Fep1 is unable to bind chromatin under low-iron conditions, and that results in activation of genes involved in iron acquisition. Studies of fungi have revealed that monothiol glutaredoxins are required to inhibit iron-dependent transcription factors in response to high levels of iron. Here, we show that the monothiol glutaredoxin Grx4 plays an important role in the negative regulation of Fep1 activity in response to iron deficiency. Deletion of the grx4(+) gene led to constitutive promoter occupancy by Fep1 and caused an invariable repression of iron transport genes. We found that Grx4 and Fep1 physically interact with each other. Grx4 contains an N-terminal thioredoxin (TRX)-like domain and a C-terminal glutaredoxin (GRX)-like domain. Deletion mapping analysis revealed that the TRX domain interacts strongly and constitutively with the C-terminal region of Fep1. As opposed to the TRX domain, the GRX domain associates weakly and in an iron-dependent manner with the N-terminal region of Fep1. Further analysis showed that Cys35 of Grx4 is required for the interaction between the Fep1 C terminus and the TRX domain, whereas Grx4 Cys172 is necessary for the association between the Fep1 N terminus and the GRX domain. Our results describe the first example of a monothiol glutaredoxin that acts as an inhibitory partner for an iron-regulated transcription factor under conditions of low iron levels.