We present evidence that the human thyroid hormone receptor forms a heterodimer with the human retinoic acid receptor. This interaction results in a cooperative increase in binding of the alpha retinoic acid receptor to a subset of thyroid hormone response elements. Mutations within the DNA binding domain or near the C-terminus abolish either receptor's ability to interact cooperatively on these elements. The thyroid hormone-retinoic acid receptor heterodimer exhibits novel transcriptional properties in that coexpression of both receptors at low levels in Green monkey kidney (CV1) cells results in a positive transcriptional effect on promoters containing a palindromic thyroid hormone response element, but has a surprisingly negative effect on a thyroid hormone response element derived from the alpha myosin heavy chain gene. These results suggest that by forming heterodimers, more elab-orate control of transcription can be achieved by creating receptor combinations with differing activities.