Aryl hydrocarbon receptor (AhR), a member of the bHLH-PAS family, is a ligand-activated transcription factor which plays an important role in normal liver development and in mediating the toxicity of polycyclic and halogenated aromatic hydrocarbon pollutants such as 2,3,7,8-tetrachlorodibenzo-p-dioxin. Phosphorylation is known to regulate the transformation process of unliganded AhR into functionally active AhR/ARNT heterodimer that has high affinity for dioxin-responsive elements (DRE) and transactivation activity. Here, we report that DRE binding activity of the AhR is regulated by phosphorylation on the AhR/ARNT complex itself. Studies with specific protein phosphatases indicated that tyrosine phosphorylation is involved in this modulation. In addition, the AhR is phosphorylated at tyrosine residue(s) as determined by anti-phosphotyrosine immunoblot analysis. These results suggest that tyrosine phosphorylation on the AhR is required for its DNA binding activity and may provide mammalian cells with another layer of control mechanism that allows cell type specific and developmental stage specific induction of the AhR target genes.