In order to specify the many cell types of an organism, transcription factors must form transcriptional regulatory complexes at enhancers to control the expression of genes that determine cell fate. These complexes are essential to the spatiotemporal specificity of gene regulation during both development and disease; yet molecular understanding of their exact composition and operation is limited. Both protein-protein and protein-DNA interactions among the transcription factors bound to enhancer DNA will determine the stability and regulatory meaning of a given complex. Here, we use the polymerizing Drosophila ETS family transcriptional repressor Yan as a model transcription factor to explore the impact of altering the affinity of protein-protein interactions on the outcome of gene regulation. To do so, we developed a model of Yan binding to enhancer elements at equilibrium, which depends on a minimal number of interactions including polymerization. In the process, we discovered that the model reproduces features of Yan DNA binding in vivo, and show that the polymerization of Yan highlights a trade-off between binding affinity and specificity, with implications for Yan as a transcriptional repressor. Furthermore, the model predicted a role for medium-affinity polymerization in maintaining Yan function, with increased polymerization beyond Yan wild type levels resulting in loss of function. To test this, we employed an engineering approach based on structural and sequence-homology to create mutants of Yan with increased self-association affinity over four orders of magnitude. These mutants result in loss of function phenotypes proportional to their strength of polymerization, and result in a dramatic restructuring of the sub-cellular localization of Yan. Additionally, examination of specific cell fate defects in the Drosophila eye revealed a role for regulation of polymerization in the execution of the various regulatory decisions Yan makes throughout development. Taken together, this work broadens the picture of the implications of Yan polymerization, and establishes a firm role for balanced protein-protein and protein-DNA interactions in the transcriptional regulation of development.