The Ah receptor (AHR) mediates the metabolic adaptation to a number of planar aromatic chemicals. Essential steps in this adaptive mechanism include AHR binding of ligand in the cytosol, translocation of the receptor to the nucleus, dimerization with the Ah receptor nuclear translocator, and binding of this heterodimeric transcription factor to dioxin-responsive elements (DREs) upstream of promoters that regulate the expression of genes involved in xenobiotic metabolism. The AHR is also involved in other aspects of mammalian biology, such as the toxicity of molecules like 2,3,7,8-tetrachlorodibenzo-p-dioxin as well as regulation of normal liver development. In an effort to test whether these additional AHR-mediated processes require a nuclear event, such as DRE binding, we used homologous recombination to generate mice with a mutation in the AHR nuclear localization/DRE binding domain. These Ahr(nls) mice were found to be resistant to all 2,3,7,8-tetrachlorodibenzo-p-dioxin-induced toxic responses that we examined, including hepatomegaly, thymic involution, and cleft palate formation. Moreover, aberrations in liver development observed in these mice were identical to that observed in mice harboring a null allele at the Ahr locus. Taken in sum, these data support a model where most, if not all, of AHR-regulated biology requires nuclear localization.