Nuclear receptors are hormone-regulated transcription factors that play key roles in normal physiology and development; conversely, mutant nuclear receptors are associated with a wide variety of neoplastic and endocrine disorders. Typically, these receptor mutants function as dominant negatives and can interfere with wild-type receptor activity. Dominant-negative thyroid hormone receptor (TR) mutations have been identified in over 60% of the human hepatocellular carcinomas analyzed. Most of these mutant TRs are defective for corepressor release or coactivator binding in vitro, accounting for their transcriptional defects in vivo. However, two HCC-TR mutants that function as dominant-negative receptors in cells display near-normal properties in vitro, raising questions about the molecular basis behind their transcriptional defects. We report here that a single amino acid substitution, located at the same position in the DNA-binding domain of both mutants, is responsible for their impaired transcriptional activation and dominant-negative properties. Significantly, this amino acid, K74 in TRalpha, is highly conserved in all known nuclear receptors and seems to function as an allosteric sensor that regulates the transcriptional activity of these receptors in response to binding to their DNA recognition sequences. We provide evidence that these two human hepatocellular carcinoma mutants have acquired dominant-negative function as a result of disruption of this allosteric sensing. Our results suggest a novel mechanism by which nuclear receptors can acquire transcriptional defects and contribute to neoplastic disease.