The silencing mediator for retinoic acid and thyroid hormone receptors (SMRT) mediates transcriptional repression by recruiting histone deacetylases (HDACs) to the DNA-bound nuclear receptor complex. The full-length SMRT (SMRTe) contains an N-terminal sequence that is highly conserved to the nuclear receptor corepressor N-CoR. To date, little is known about the activity and function of the full-length SMRTe protein, despite extensive studies on separated receptor interaction and transcriptional repression domains. Here we show that SMRTe inhibits MEF2C transcriptional activation by targeting selective HDACs to unique subnuclear domains. Indirect immunofluorescence studies with anti-SMRTe antibody reveal discrete cytoplasmic and nuclear speckles, which contain RARalpha in an RA-sensitive manner. Formation of the SMRTe nuclear speckles results in recruitment of several class I and class II HDACs to these subnuclear domains in a process depending on HDAC enzymatic activity. Intriguingly, although HDAC4 is located primarily in the cytoplasm, coexpression of SMRTe dramatically translocates HDAC4 from the cytoplasm into the nucleus, where HDAC4 prevents MEF2C from activating muscle differentiation. SMRTe also translocates HDAC5 from diffusive nucleoplasm into discrete nuclear domains. Accordingly, SMRTe synergizes with HDAC4 and 5 to inhibit MEF2C transactivation of target promoter, suggesting that nuclear domain targeting of HDAC4/5 may be important in preventing muscle cell differentiation. These results highlight an unexpected new function of the nuclear receptor corepressor SMRTe for its role in regulating cellular trafficking of nuclear receptor and selective HDACs that may play an important role in regulation of cell growth and differentiation.