Thyroid hormone (T3) receptors (T3Rs) are ligand-modulated transcription factors that belong to the nuclear receptor superfamily. Whereas the well-conserved DNA-binding domain and the relatively well-conserved ligand-binding domain in T3Rs have been characterized in detail, limited information is available on the contribution of the variable N terminus to the transcriptional properties of T3Rs. To gain greater insight into the function of the N terminus, we generated a deletion mutant of T3Ralpha, T3Ralpha-deltaN1, that lacks amino acids 7-45 and assessed the effect of this deletion on all known transcriptional activities of T3Ralpha. Despite the fact that T3Ralpha-deltaN1 was expressed and bound T3 with an affinity similar to that of wildtype T3Ralpha, all of its common transcriptional activities were lost. That is, T3Ralpha-deltaN1 did not activate transcription from a positive or negative T3 response element, and it could not interfere with AP-1 transcriptional activity. Surprisingly, T3Ralpha-deltaN1 lost its ability to bind DNA, which can account for its deficiencies as a transcriptional activator. In contrast, the ability of T3Ralpha-deltaN1 to interact with putative coactivators or corepressors was not significantly altered from that of wildtype T3Ralpha. However, overall folding of T3Ralpha-deltaN1 was altered, as indicated by differential sensitivity to limited protease digestion. These data document that the N terminus of T3Ralpha, albeit relatively short and representing a variable and unconserved region when compared with other nuclear receptors, has a critical role in proper folding of the DNA-binding domain and is required for the biological activities of full-length T3Ralpha.