The proteasome inhibitor MG132 had been shown to prevent galactose induction of the S. cerevisiae GAL1 gene, demonstrating that ubiquitin proteasome-dependent degradation of transcription factors plays an important role in the regulation of gene expression. The deletion of the gene encoding the F-box protein Mdm30 had been reported to stabilize the transcriptional activator Gal4 under inducing conditions and to lead to defects in galactose utilization, suggesting that recycling of Gal4 is required for its function. Subsequently, however, it was argued that Gal4 remains stably bound to the enhancer under inducing conditions, suggesting that proteolytic turnover of Gal4 might not be required for its function. We have performed an alanine-scanning mutagenesis of ubiquitin and isolated a galactose utilization-defective ubiquitin mutant. We have used it for an unbiased suppressor screen and identified the inhibitor Gal80 as a suppressor of the transcriptional defects of the ubiquitin mutant, indicating that the protein degradation of the inhibitor Gal80, and not of the activator Gal4, is required for galactose induction of the GAL genes. We also show that in the absence of Gal80, Mdm30 is not required for Gal4 function, strongly supporting this hypothesis. Furthermore, we have found that Mediator controls the galactose-induced protein degradation of Gal80, which places Mediator genetically upstream of the activator Gal4. Mediator had originally been isolated by its ability to respond to transcriptional activators, and here we have discovered a leading role for Mediator in the process of transcription. The protein kinase Snf1 senses the inducing conditions and transduces the signal to Mediator, which initiates the degradation of the inhibitor Gal80 with the help of the E3 ubiquitin ligase SCF(Mdm30). The ability of Mediator to control the protein degradation of transcriptional inhibitors indicates that Mediator is actually able to direct its own recruitment to gene promoters.