HES-1 is a Hairy-related basic helix-loop-helix protein with three evolutionarily conserved regions known to define its function as a transcription repressor. The basic region, helix-loop-helix domain, and WRPW motif have been characterized for their molecular function in DNA binding, dimer formation, and corepressor recruitment, respectively. In contrast, the function conferred by a fourth conserved region, the helix 3-helix 4 (H-3/4) domain, is not known. To better understand H-3/4 domain function, we expressed HES-1 variants under tetracycline-inducible control in PC12 cells. As expected, the induced expression of moderate levels of wild-type HES-1 in PC12 cells strongly inhibited nerve growth factor-induced differentiation. This repression was dependent on the H-3/4 domain. Unexpectedly, expression of HES-1 also arrested cell growth, an effect that could be reversed upon down regulation of HES-1. Concomitant with growth arrest, there was a strong reduction in bromodeoxyuridine incorporation and PCNA protein levels, although not in cyclin D1 expression. Expression of a HES-1 protein carrying the H-3/4 domain, but not the WRPW domain, still partially inhibited both proliferation and differentiation. Transcription assays in PC12 cells directly demonstrated that the H-3/4 domain can mediate DNA-binding-dependent transcription repression, even in the absence of corepressor recruitment by the WRPW motif. HES-1 expression strongly repressed transcription of the p21(cip1) promoter, a cyclin-cyclin-dependent kinase inhibitor up regulated during NGF-induced differentiation, and the H-3/4 domain is necessary for this repression. Thus, the H-3/4 domain of HES-1 contributes to transcription repression independently of WRPW function, inhibits neurite formation, and facilitates two distinct and previously uncharacterized roles for HES-1: the inhibition of cell proliferation and the direct transcriptional repression of the NGF-induced gene, p21.