The thyroid hormone receptor (TR) regulates the transcription of its target genes by interacting with specific hormone response elements consisting usually of directly repeated half-sites with the consensus sequence AGGTCA. To investigate the role of the spacer sequences separating the half-sites, heterodimers formed by TRalpha and the retinoid-X receptor (RXR) were used in a PCR based selection and amplification assay. The TRalpha/RXR heterodimer selected for elements with directly repeated half-sites having a spacer of 4 nucleotides (DR4). Preferences for nucleotides in the TR binding half-site motif as well as for the 4 nucleotides separating the two half-sites were found. DNA binding and transfection studies using DR4 elements with different spacer sequences showed the importance of these nucleotides for the activity of the response element: some spacer sequences allowed little or no transactivation from the element, whereas other sequences supported strong transactivation. A pyrimidine nucleotide in position three of the spacer enhanced TRalpha binding and transactivation. Additional experiments showed that heterodimers between RXR and other putative receptors exhibited a similar but distinct specificity for the spacer sequence. Our results thus suggest that the four nucleotides separating the two half-sites in hormone response elements have a major role in determining induction of hormone responsive genes.