The aryl hydrocarbon receptor (AhR) is a ligand-dependent transcription factor that is activated by a structurally diverse array of synthetic and natural chemicals, including toxic halogenated aromatic hydrocarbons such as 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD). Analysis of the molecular events occurring in the AhR ligand binding and activation processes requires structural information on the AhR Per-Arnt-Sim (PAS) B-containing ligand binding domain, for which no experimentally determined structure has been reported. With the availability of extensive structural information on homologous PAS-containing proteins, a reliable model of the mouse AhR PAS B domain was developed by comparative modeling techniques. The PAS domain structures of the functionally related hypoxia-inducible factor 2alpha (HIF-2alpha) and AhR nuclear translocator (ARNT) proteins, which exhibit the highest degree of sequence identity and similarity with AhR, were chosen to develop a two-template model. To confirm the features of the modeled domain, the effects of point mutations in selected residue positions on both TCDD binding to the AhR and TCDD-dependent transformation and DNA binding were analyzed. Mutagenesis and functional analysis results are consistent with the proposed model and confirm that the cavity modeled in the interior of the domain is indeed involved in ligand binding. Moreover, the physicochemical characteristics of some residues and of their mutants, along with the effects of mutagenesis on TCDD and DNA binding, also suggest some key features that are required for ligand binding and activation of mAhR at a molecular level, thus providing a framework for further studies.