A derivative of mouse mammary tumor virus (MTV) DNA, LTL, was constructed in vitro and introduced into the genome of mouse L cells. Transcription of LTL was stimulated by dexamethasone, a glucocorticoid hormone. Two features of LTL chromatin structure are altered upon hormone treatment. First, "moderate" DNAase I sensitivity of the entire LTL element increases following addition of dexamethasone; this alteration persists after hormone withdrawal, when LTL transcription is shut off. Second, a discrete DNAase I-hypersensitive region is induced with a time course that closely parallels the rate of increasing transcription from the MTV promoter; this structure disappears upon hormone removal. The induced hypersensitive region coincides with a segment of the MTV long terminal repeat sequence that specifically binds purified glucocorticoid receptor in vitro and functions as a hormone-dependent enhancer element in vivo. We suggest that specific glucocorticoid receptor-DNA interactions may alter the configuration of DNA or chromatin in the vicinity of the binding sites, thereby creating an active transcriptional enhancer.