The thyroid hormone receptor and the highly related viral oncoprotein v-erbA are found exclusively in the nucleus as stable constituents of chromatin. Unlike most transcriptional regulators, the thyroid hormone receptor binds with comparable affinity to naked and nucleosomal DNA. In vitro reconstitution experiments and in vivo genomic footprinting have delineated the chromatin structural features that facilitate association with the receptor. Chromatin bound thyroid hormone receptor and v-erbA generate Dnase I hypersensitive sites independent of ligand. The unliganded thyroid hormone receptor and v-erbA associate with a corepressor complex containing NCoR, SIN3, and histone deacetylase. The enzymatic activity of the deacetylase and a chromatin environment are essential for the dominant repression of transcription by both the unliganded thyroid hormone receptor and v-erbA. In the presence of ligand, the thyroid hormone receptor undergoes a conformational change that weakens interactions with the corepressor complex while facilitating the recruitment of transcriptional coactivators such as p300 and PCAF possessing histone acetyltransferase activity. The ligand-bound thyroid hormone receptor directs chromatin disruption events in addition to histone acetylation. Thus, the thyroid hormone receptor and v-erbA make very effective use of their stable association with chromatin and their capacity to alter the chromatin environment as a major component of the transcription regulation process. This system provides an exceptionally useful paradigm for investigating the structural and functional consequences of targeted chromatin modification.