We have assembled the thyroid hormone-inducible promoter of the Xenopus thyroid hormone receptor (TR)beta A gene into chromatin using replication-coupled and -independent assembly pathways in vivo. We establish that heterodimers of TR and 9-cis retinoic acid receptors (RXR) can bind to their recognition sites within chromatin both in vivo and in vitro and alternately repress or activate transcription dependent on the absence or presence of thyroid hormone. Maximal transcriptional repression requires the presence of unliganded TR/RXR heterodimers during replication-coupled chromatin assembly. We demonstrate an increase in transcription directed by the TR beta A promoter of over two orders of magnitude in vivo, following the addition of thyroid hormone. This increase in transcription involves the relief of the repressed state that is established by the unliganded TR/RXR heterodimer during replication-coupled chromatin assembly. The association of thyroid hormone with the chromatin-bound TR/RXR heterodimer leads to the disruption of local chromatin structure in a transcription-independent process. Thus, chromatin structure has multiple roles in the regulation of TR beta A gene expression in vivo: The TR/RXR heterodimer recognizes the response element within chromatin, TR/RXR makes use of the chromatin assembly process to silence transcription more efficiently, and TR/RXR directs the disruption of local chromatin structure in response to thyroid hormone.