Synthetic steroid hormone antagonists are clinically important compounds that regulate physiological responses to steroid hormones. The antagonists bind to the hormone receptors, which are ligand-inducible transcription factors, and modulate their gene-regulatory activities. In most instances, a steroid receptor, such as progesterone receptor (PR) or estrogen receptor (ER), is transcriptionally inactive when complexed with an antagonist and competitively inhibits transactivation of a target steroid-responsive gene by the cognate hormone-occupied receptor. In certain cellular and promoter contexts, however, antagonist-occupied PR or ER acquires paradoxical agonist-like activity. The cellular mechanisms that determine the switch from the negative to the positive mode of transcriptional regulation by an antagonist-bound steroid receptor are unknown. We now provide strong evidence supporting the existence of a cellular inhibitory cofactor that interacts with the B form of human PR (PR-B) complexed with the antiprogestin RU486 to maintain it in a transcriptionally inactive state. In the presence of unliganded thyroid hormone receptor (TR) or ER complexed with the antiestrogen 4-hydroxytamoxifen, which presumably sequesters a limiting pool of the inhibitory cofactor, RU486-PR-B functions as a transcriptional activator of a progesterone-responsive gene even in the absence of hormone agonist. In contrast, hormone-occupied TR or ER fails to induce transactivation by RU486-PR-B. Recent studies revealed that a transcriptional corepressor, NCoR (nuclear receptor corepressor), interacts with unliganded TR but not with liganded TR. Interestingly, coexpression of NCoR efficiently suppresses the partial agonistic activity of antagonist-occupied PR-B but fails to affect transactivation by agonist-bound PR-B. We further demonstrate that RU486-PR-B interacts physically with NCoR in vitro. These novel observations suggest that the inhibitory cofactor that associates with RU486-PR-B and represses its transcriptional activity is either identical or structurally related to the corepressor NCoR. We propose that cellular mechanisms that determine the switch from the antagonistic to the agonistic activity of RU486-PR-B involve removal of the corepressor from the antagonist-bound receptor so that it can effect partial but significant gene activation.