The epithelium-specific ETS (ESE)-1 transcription factor is induced in chondrocytes by interleukin-1beta (IL-1beta). We reported previously that early activation of EGR-1 by IL-1beta results in suppression of the proximal COL2A1 promoter activity by displacement of Sp1 from GC boxes. Here we report that ESE-1 is a potent transcriptional suppressor of COL2A1 promoter activity in chondrocytes and accounts for the sustained, NF-kappaB-dependent inhibition by IL-1beta. Of the ETS factors tested, this response was specific to ESE-1, since ESE-3, which was also induced by IL-1beta, suppressed COL2A1 promoter activity only weakly. In contrast, overexpression of ETS-1 increased COL2A1 promoter activity and blocked the inhibition by IL-1beta. These responses to ESE-1 and ETS-1 were confirmed using siRNA-ESE1 and siRNA-ETS1. In transient cotransfections, the inhibitory responses to ESE-1 and IL-1beta colocalized in the -577/-132 bp promoter region, ESE-1 bound specifically to tandem ETS sites at -403/-381 bp, and IL-1-induced binding of ESE-1 to the COL2A1 promoter was confirmed in vivo by ChIP. Our results indicate that ESE-1 serves a potent repressor function by interacting with at least two sites in the COL2A1 promoter. However, the endogenous response may depend upon the balance of other ETS factors such as ETS-1, and other IL-1-induced factors, including EGR-1 at any given time. Intracellular ESE-1 staining in chondrocytes in cartilage from patients with osteoarthritis (OA), but not in normal cartilage, further suggests a fundamental role for ESE-1 in cartilage degeneration and suppression of repair.