Spinocerebellar ataxia type 7 (SCA7) is an autosomal dominant disorder caused by a CAG repeat expansion. To determine the mechanism of neurotoxicity, we produced transgenic mice and observed a cone-rod dystrophy. Nuclear inclusions were present, suggesting that the disease pathway involves the nucleus. When yeast two-hybrid assays indicated that cone-rod homeobox protein (CRX) interacts with ataxin-7, we performed further studies to assess this interaction. We found that ataxin-7 and CRX colocalize and coimmunoprecipitate. We observed that polyglutamine-expanded ataxin-7 can dramatically suppress CRX transactivation. In SCA7 transgenic mice, electrophoretic mobility shift assays indicated reduced CRX binding activity, while RT-PCR analysis detected reductions in CRX-regulated genes. Our results suggest that CRX transcription interference accounts for the retinal degeneration in SCA7 and thus may provide an explanation for how cell-type specificity is achieved in this polyglutamine repeat disease.