Thyroid hormone (T3) receptors (T3Rs) are ligand-modulated transcription factors that bind to thyroid hormone response elements (T3REs) and mediate either positive or negative transcriptional regulation of target genes. In addition, in response to ligand binding, T3Rs can interfere with AP-1 activity and thereby inhibit transcription of AP-1-responsive genes. T3Rs were recently shown to form heterodimers with retinoid X receptors (RXRs), leading to increased binding to T3REs in vitro and potentiation of transcriptional responses in vivo. Here we demonstrate that T3R␣ forms stable heterodimers with RXR␣ in living cells. Most important, we describe a new role for RXR␣ in modulating ligand-dependent T3R␣ activity: heterodimerization with RXR␣ greatly increases transcriptional interference with AP-1 activity, augments T3-dependent transcriptional activation, and potentiates the reversal of ligand-independent activation by T3R␣. In all three cases, the responses occur at substantially lower T3 concentrations when elicited by T3R␣ plus RXR␣ than by T3R␣ alone. In vitro, the binding of T3 decreases the DNA-binding activity of T3R␣ homodimers but does not affect DNA binding by T3R␣:RXR␣ heterodimers. We provide evidence that increased activities of T3R␣ at lower T3 concentrations are not due to changes in its T3 binding properties. Instead, the altered response could be mediated by either RXR␣-induced conformational changes, increased stability of heterodimers over homodimers, especially following T3 binding, or both.Thyroid hormone 3,5,3Ј-triiodo-L-thyronine (T3) is required for normal growth and development and maintenance of normal metabolism (for a review, see reference 27). The actions of T3 are mediated through binding to T3 receptors (T3Rs), which belong to the nuclear receptor superfamily of transcription factors encoded by the c-erbA␣ and c-erbA genes (36, 41). Nuclear receptors are ligand-activated transcription factors possessing highly conserved DNA-binding domains and moderately conserved ligand-binding domains (7,15). Together with receptors for retinoic acid (RA) and vitamin D, the T3Rs form a subgroup that recognizes the consensus half-site AGGTCA (7). This sequence can be arranged as a direct repeat, a palindrome, or an inverted repeat, and the spacing between the half sites and their relative orientations determine receptor specificity and the nature of the transcriptional response (26,34,39). For example, unliganded T3R␣ can repress promoters that contain palindromic T3 response elements (T3REs), and this repression is reversed upon binding of T3, resulting in net activation (13, 37). Unliganded T3R␣ can also activate transcription from promoters which contain an inverted repeat of a variant half-site, and this activation is reversed upon T3 binding (34). Whereas the ligand-independent repression of basal promoter activity and the ligand-dependent activation functions are mediated by sequences within the Cterminal ligand-binding domain (4-6, 30, 32), the ligand-independent activation function is medi...