The v-erbA oncogene, one of the two oncogenes of the avian erythroblastosis virus, efficiently blocks erythroid differentiation and suppresses erythrocyte-specific gene transcription. Here we show that the overexpressed thyroid hormone receptor c-erbA effectively modulates erythroid differentiation and erythrocyte-specific gene expression in a T3-dependent fashion, when introduced into erythroid cells via a retrovirus. In contrast, the endogenous thyroid hormone receptor does not detectably affect erythroid differentiation. The analysis of a series of chimeric v-/c-erbA proteins suggests that the v-erbA oncoprotein has lost one type of thyroid hormone receptor function (regulating erythrocyte gene transcription in response to T3), but constitutively displays another function: it represses transcription in the absence of T3. The region responsible for the loss of hormone-dependent regulator activity of v-erbA has been mapped to the very C-terminus of c-erbA, encompassing a cluster of highly conserved amino acid residues with the potential to form an amphipathic alpha-helix.