A central question arising from the model of eukaryotic gene regulation by steroid hormone receptors is whether or not proteins represent pre-existing gene regulatory proteins that are activated on exposure to the extracellular signal. It has been generally believed that the ligand-binding of steroid hormone receptors triggers an allosteric change in receptor structure, manifested by an increased affinity of the receptor for DNA in vitro and nuclear target elements in vivo, as monitored by nuclear translocation. But this model has been challenged by recent reports indicating that glucocorticoid and progesterone receptors bind specifically in vitro to target DNA sequences even in the absence of hormone. On the other hand, it appears that the hormone induces protection in vivo of the glucocorticoid response element of the tyrosine amino transferase gene. Here we show that under conditions permitting minimal in vitro manipulation, the steroid-free glucocorticoid receptor in crude cytosol associates with the hsp90 heat shock protein (relative molecular mass Mr approximately equal to 90,000) to form a large 300K complex, rather than the 94K liganded receptor monomer. More importantly, we have developed an assay to demonstrate the requirement of hormone to dissociate the 300K complex by heat treatment. Specific DNA-binding activity of the receptor becomes apparent in this process, showing that DNA binding occurs but is inhibited in the large heteromeric complex. We propose a model in which receptor function is repressed by association of the receptor with hsp90. Dissociation of this complex is induced by the binding of steroid and is apparently an irreversible process.