Activating somatic mutations in the thyrotropin (TSH) receptor have been identified as a cause of hyperfunctioning thyroid adenomas, and germline mutations have been found in familial nonautoimmune hyperthyroidism and sporadic congenital hyperthyroidism. All mutations reported to date have been located in the transmembrane domain. We now report an example of an activating mutation in the extracellular, TSH-binding domain, found in a male infant with congenital hyperthyroidism due to a toxic adenoma. The pregnancy was remarkable for fetal tachycardia. Scintigraphic studies demonstrated a large nodule in the right lobe, and a hemithyroidectomy was performed at the age of 2 yr. Direct sequencing of the TSH receptor gene revealed a mutation in one allele resulting in a substitution of serine281 by isoleucine (Ser281--> Ile) in the extracellular domain. The mutation was restricted to the adenomatous tissue. Expression of the Ser281--> Ile mutation in vitro revealed an increase in basal cAMP levels. Affinity for TSH was increased by the mutation. These findings demonstrate that activating mutations can also occur in the extracellular domain of the TSH receptor, and support a model in which the extracellular domain serves to restrain receptor function in the absence of TSH or antibody-induced conformational changes.