Thyroid hormone is essential for normal development, differentiation, and metabolic balance. Thyroid hormone action is mediated by multiple thyroid hormone receptor isoforms derived from two distinct genes. The thyroid hormone receptors belong to a nuclear receptor superfamily that also includes receptors for other small lipophilic hormones. Thyroid hormone receptors function by binding to specific thyroid hormone-responsive sequences in promoters of target genes and by regulating transcription. Thyroid hormone receptors often form heterodimers with retinoid X receptors. Heterodimerization is regulated through distinct mechanisms that together determine the specificity and flexibility of the sequence recognition. Amino-terminal regions appear to modulate thyroid hormone receptor function in an isoform-dependent manner. Unliganded thyroid hormone receptor represses transcription through recruitment of a corepressor complex, which also includes Sin3A and histone deacetylase. Ligand binding alters the conformation of the thyroid hormone receptor in such a way as to release the corepressor complex and recruit a coactivator complex that includes multiple histone acetyltransferases, including a steroid receptor family coactivator, p300/CREB-binding protein-associated factor (PCAF), and CREB binding protein (CBP). The existence of histone-modifying activities in the transcriptional regulatory complexes indicates an important role of chromatin structure. Stoichiometric, structural, and sequence-specific rules for coregulator interaction are beginning to be understood, as are aspects of the tissue specificity of hormone action. Moreover, knockout studies suggest that the products of two thyroid hormone receptor genes mediate distinct functions in vivo. The increased understanding of the structure and function of thyroid hormone receptors and their interacting proteins has markedly clarified the molecular mechanisms of thyroid hormone action.