Abstract Background Arabidopsis NPR1 is a master regulator of systemic acquired resistance. NPR1 binds to TGA transcription factors and functions as a transcriptional co-activator. In rice, NH1/OsNPR1 functions to enhance innate immunity. NRR disrupts NH1 function, when over-expressed. Results We have established a rice transient protoplast assay to demonstrate that NH1 is a transcriptional co-activator and that NRR represses NH1-mediated activation. We identified three NRR homologues (RH1, RH2, and RH3). RH1 and RH3, but not RH2, also effectively repress NH1-mediated transcriptional activation. NRR, RH1, RH2, and RH3 share sequence similarity in a region beyond the previously identified NPR1-interacting domain. This region is required for strong interaction with NH1. A double point mutation, W66A/F70A, in this novel NH1-interacting domain severely reduces interaction with NH1. Mutation W66A/F70A also greatly reduces the ability of NRR to repress NH1-mediated activation. RH2 carries a deviation (amino acids AV) in this region as compared to consensus sequences (amino acids ED) among NRR, RH1, and RH3. A substitution (AV to ED) in RH2 results in strong binding of mutant RH2ED to NH1 and effective repression of NH1-mediated activation. Conclusions The protoplast-based transient system can be used to dissect protein domains associated with their functions. Our results demonstrate that the ability of NRR and its homologues to repress NH1-mediated transcriptional activation is tightly correlated with their ability to bind to NH1. Furthermore, a sequence is identified as a novel NH1-interacting domain. Importantly, this novel sequence is widely present in plant species, from cereals to castor bean plants, to poplar trees, to Arabidopsis, indicating its significance in plants.