The syndrome of thyroid hormone resistance (THR) is caused by multiple distinct mutations of the ligand-binding domain of the thyroid hormone beta receptor. Although the mutant receptors are transcriptionally inactive, they inhibit normal receptor function in a dominant negative manner to cause hormone resistance. Because most of the naturally occurring mutations are clustered within two areas that lie on either side of a putative dimerization region, we hypothesized that receptor dimerization was important for dominant negative inhibition. In gel mobility shift assays, two THR mutants (G345R and P453H) formed homodimers as well as heterodimers with the retinoic acid X receptor alpha. In contrast, an artificial mutation (L428R) in one of the hydrophobic heptad repeats of the putative receptor dimerization domain impaired heterodimerization with retoinoic acid X receptor alpha without altering the formation of homodimers. Double mutants containing either of the THR mutations along with the dimerization mutation formed homodimers but not heterodimers, reflecting the properties of the dimerization mutant alone. In transient expression assays using positively (TRETKLuc) or negatively (TSH alpha Luc) regulated reporter genes, the dominant negative activity of the THR mutants was eliminated by the addition of the dimerization mutation. These results support a mechanism for dominant negative activity by THR mutants in which functionally inactive heterodimers bind to DNA to inhibit access by normal receptors.