The two isoforms of thyroid hormone receptor (TR), alpha and beta, are highly homologous, except in the amino-terminal domain. Specific physiological roles for the receptor isoforms have not yet been defined. In transient transfection assays, TRalpha is twice as potent a thyroid hormone (T3)-dependent transactivator as TRbeta on a number of thyroid hormone response elements (TREs). Using chimeras of TRalpha and -beta, we have determined that the higher transactivation by TRalpha requires the entire ligand-binding domain. The amino-terminal and DNA-binding domains of the two isoforms are interchangeable. These studies were facilitated by the use of a synthetic TRE composed of a direct repeat separated by 4 bp which also included a third half-site 19 bp 3' to this on the opposite strand. In the presence of T3, this TRE confers a 5-fold higher response to TRalpha than to TRbeta, but there is no difference in expression without T3. Functional studies indicate that all three half-sites are needed for the increased responsiveness to TRalpha, but gel shift analyses show no striking differences in the ratios of TRalpha to TRbeta binding compared to other wild-type TREs. These results suggest that important functional differences are present in the ligand-binding domain of TRalpha and -beta despite their high homology.