The specificity of target gene activation by steroid receptors is encoded within a small, cysteine-rich domain that is believed to form two zinc-coordinated fingers. Here we show that the ability of glucocorticoid and estrogen receptors to discriminate between their closely related response elements resides in the two amino acids located between the two cysteines in the C-terminal half of the first finger. Unexpectedly, chimeric glucocorticoid receptors harboring portions of the interfinger and/or second finger of the estrogen receptor have the ability to activate transcription from either a GRE- or ERE-containing promoter. We surmise that whereas the "knuckle" region of the first finger may be the primary determinant of sequence recognition, the remainder of the DNA binding domain normally confers structural information required for preventing promiscuous HRE recognition.