Isoform specificity likely plays a large role in the ability of the thyroid hormone receptor (TR) to specifically regulate gene expression in both the presence and absence of its cognate ligand, triiodothyronine. To investigate further the mechanism of isoform specificity of human TRs (TR alpha 1 and TR beta 1), we have examined their functional effects on positive thyroid hormone response elements (TREs) both in the presence and absence of ligand. TR alpha 1 was greater than 2-fold more potent than TR beta 1 on both TREs studied, in terms of both ligand-independent repression and ligand-dependent stimulation. By creating a number of chimeric and mutant receptors, we have established that the increased functional potency of TR alpha 1 is due to its unique amino terminus. Deletion or substitution of the TR alpha 1 amino terminus leads to a loss of both its ligand-independent and -dependent functions on positive TREs. Furthermore, the TR alpha 1 amino terminus antagonizes homodimer formation on the positive TREs studied. TR constructs, which contain the TR alpha 1 amino terminus, are unable to form homodimers and form exclusively heterodimers with RXR alpha on direct repeat and palindromic TREs. Deletion of the amino terminus from either TR isoform leads to preferential homodimer formation, which suggests that the TR amino terminus is important for relative heterodimerization capability. From these data, we conclude that TR alpha 1 isoform specificity on positive TREs resides predominantly in its amino terminus through its ability to favor heterodimerization with the retinoid X receptor or other nuclear proteins.