Thyroid hormone plays a causative role during frog metamorphosis, and its effect is mediated by thyroid hormone receptors (TRs). To investigate the function of Xenopus TRs, we have recently developed a thyroid hormone dependent in vivo transcription system by introducing TRs and RXRs (9-cis-retinoic acid receptors) into Xenopus oocytes. Interestingly, using this system, we have found that the TRalphaB cloned previously is defective in transcriptional activation compared with TRalphaA. In vitro DNA binding experiments show that TRalphaB.RXR heterodimers have drastically reduced affinity for a thyroid hormone response element. Site-directed mutagenesis shows that two of the seven amino acid residues that differ between TRalphaA and TRalphaB are responsible for the defect in TRalphaB function. These two residues affect the DNA binding by both TR.RXR heterodimers and TR homodimers. In contrast, heterodimer formation with RXRs is not affected as demonstrated by coimmunoprecipitation and dominant-transcriptional inhibition experiments. By cDNA and genomic DNA sequence analysis, we have demonstrated that the residues, which affect TRalphaB function when mutated, are identical between the wild type TRalphaB and TRalphaA. Thus, our experiments have discovered the first amphibian TR mutant. The DNA binding and transcription activation functions of the mutant are discussed in relation to the recently published TR crystal structure.