The estrogen receptor (ER) is a transcription factor whose activity is normally activated by the hormone estradiol and inhibited by antiestrogen. It has been found that certain mutational changes in the activation function-2 region in the hormone-binding domain of the human ER result in ligand activity inversion mutants, i.e. receptors that are now activated by antiestrogen and inhibited by estrogen. The ER point mutant L540Q is activated by several antiestrogens (the more pure antiestrogens ICI 164,384 and RU 54,876 or the partial antiestrogen trans-hydroxytamoxifen) but not by estradiol. The presence of the F domain and an intact activation function-i in the A/B domain are required for this activity, as is the DNA-binding ability of the receptor. This inverted ligand activity is observed with several estrogen-responsive promoters, both simple and complex; however, the activating ability of antiestrogens is observed only in some cells, highlighting the important role of cell-specific factors in ligand interpretation. The introduction of two additional amino acid changes close to 540 results in receptors that are still not activated by estradiol but are now able to distinguish between partial antiestrogens (which remain agonistic) and pure antiestrogens (which show a greatly reduced stimulatory activity). These ligand activity inversion mutants remain stable in cells in the presence of the antiestrogen ICI 164,384, as does a related ER mutant receptor that shows the normal, wild type ER ligand activity profile in which ICI 164,384 is transcriptionally inactive. Thus, the presence of adequate levels of mutant ER may be necessary but not sufficient for ICI 164,384 to elicit transcriptional activity. These findings highlight the means by which the carboxyl-terminal region in domain E functions to interpret the activity of a ligand, and they demonstrate that rather minimal changes in the ER can result in receptors with inverted response to antiestrogen and estrogen. Such point mutations, if present in estrogen target cells, would result in antiestrogens being seen as growth stimulators, rather than suppressors, with potentially detrimental consequences in terms of breast cancer treatment with antiestrogens.