Mediator, an evolutionary conserved large multisubunit protein complex with a central role in regulating RNA polymerase II-transcribed genes, serves as a molecular switchboard at the interface between DNA binding transcription factors and the general transcription machinery. Mediator subunits include the Cdk8 module, which has both positive and negative effects on activator-dependent transcription through the activity of the cyclin-dependent kinase Cdk8, and the tail module, which is required for positive and negative regulation of transcription, correct preinitiation complex formation in basal and activated transcription, and Mediator recruitment. Currently, the molecular mechanisms governing Mediator function remain largely undefined. Here we demonstrate an autoregulatory mechanism used by Mediator to repress transcription through the activity of distinct components of different modules. We show that the function of the tail module component Med3, which is required for transcription activation, is suppressed by the kinase activity of the Cdk8 module. Med3 interacts with, and is phosphorylated by, Cdk8; site-specific phosphorylation triggers interaction with and degradation by the Grr1 ubiquitin ligase, thereby preventing transcription activation. This active repression mechanism involving Grr1-dependent ubiquitination of Med3 offers a rationale for the substoichiometric levels of the tail module that are found in purified Mediator and the corresponding increase in tail components seen in cdk8 mutants.