Aberrant transcriptional repression through chromatin remodelling and histone deacetylation has been postulated to represent a driving force underlying tumorigenesis because histone deacetylase inhibitors have been found to be effective in cancer treatment. However, the molecular mechanisms by which transcriptional derepression would be linked to tumour suppression are poorly understood. Here we identify the transcriptional repressor Pokemon (encoded by the Zbtb7 gene) as a critical factor in oncogenesis. Mouse embryonic fibroblasts lacking Zbtb7 are completely refractory to oncogene-mediated cellular transformation. Conversely, Pokemon overexpression leads to overt oncogenic transformation both in vitro and in vivo in transgenic mice. Pokemon can specifically repress the transcription of the tumour suppressor gene ARF through direct binding. We find that Pokemon is aberrantly overexpressed in human cancers and that its expression levels predict biological behaviour and clinical outcome. Pokemon's critical role in cellular transformation makes it an attractive target for therapeutic intervention.