Transcription by RNA polymerase II inSaccharomyces cerevisiaeand in humans is widespread, even in genomic regions that do not encode proteins1-6. The purpose of such intergenic transcription is largely unknown, although it can be regulatory7,8. We have discovered a role for one case of intergenic transcription by studying theS. cerevisiae SER3gene. Our previous results demonstrated that transcription ofSER3is tightly repressed during growth in rich medium9. We now show that the regulatory region of this gene is highly transcribed under these conditions and produces a non-protein-coding RNA (SRG1). Expression of theSRG1 RNAis required for repression ofSER3.Additional experiments have demonstrated that repression occurs by a transcription-interference mechanism in whichSRG1transcription across theSER3promoter interferes with the binding of activators. This work identifies a previously unknown class of transcriptional regulatory genes.