Carbaryl (1-naphthyl-N-methylcarbamate), a widely used carbamate insecticide, induces cytochrome P450 1A gene expression in mammalian cells. This activity is usually mediated by the interaction of the compound with the aryl hydrocarbon receptor. However, it has been proposed that this mechanism does not apply to carbaryl because its structure differs from that of typical aryl hydrocarbon receptor ligands. We show here that carbaryl promotes activation of target genes in a yeast-based bioassay expressing both aryl hydrocarbon receptor and aryl hydrocarbon receptor nuclear translocator. By contrast, carbaryl acted as a competitive inhibitor, rather than as an agonist, in a simplified yeast system, in which aryl hydrocarbon receptor nuclear translocator function is bypassed by fusing aryl hydrocarbon receptor to a heterologous DNA binding domain. This dual action of carbaryl, agonist and partial antagonist, was also observed by comparing carbaryl response in two vertebrate cell lines. A yeast two-hybrid assay showed that the mammalian coactivator cAMP response element-binding protein readily interacts with aryl hydrocarbon receptor bound to its canonical ligand beta-naphthoflavone, but not with the carbaryl-aryl hydrocarbon receptor complex. We propose that carbaryl interacts with aryl hydrocarbon receptor, but that its peculiar structure imposes a substandard configuration on the aryl hydrocarbon receptor ligand-binding domain that prevents interaction with key coactivators and activates transcription without the need for aryl hydrocarbon receptor nuclear translocator. This effect may be relevant in explaining its physiological effects in exposed animals, and may help to predict its effects, and that of similar compounds, in humans. Our data also identify the aryl hydrocarbon receptor/cAMP response element-binding protein interaction as a molecular target for the identification and development of new aryl hydrocarbon receptor antagonists.