Ligand-induced activation of the glucocorticoid receptor (GR) is not well understood. The GR ligand-binding domain was modeled, based on homology with the progesterone receptor. Tyrosine 735 interacts with the D ring of dexamethasone, and substitution of D ring functional groups results in partial agonist steroids with reduced ability to direct transactivation. Loss of the Tyr735 hydroxyl group by substitution to phenylalanine (Tyr735Phe) did not reduce ligand binding affinity [dissociation constant (Kd) 4.3 nM compared with Kd 4.6 nM for wild-type] and did not alter transrepression of an nuclear factor-kappaB (NF-kappaB reporter. But, there was a significant 30% reduction in maximal transactivation of a mouse mammary tumor virus (MMTV) reporter, although with an unchanged EC50 (8.6 nM compared with 6 nM). Substitution to a nonaromatic hydrophobic amino acid, valine (Tyr735Val), retained high-affinity ligand binding for dexamethasone (Kd 6 nM compared with 4.6 nM) and did not alter transrepression of NF-kappaB. However, there was a 36% reduction in MMTV activity with a right shift in EC50 (14.8 nM). The change to serine, a small polar amino acid (Tyr735Ser), caused significantly lower affinity for dexamethasone (10.4 nM). Maximal transrepression of NF-kappaB was unaltered, but the IC50 for this effect was increased. Tyr735Ser had a major shift in EC50 (118 nM) for transactivation of an MMTV reporter. Maximal transactivation of MMTV induced by the natural ligand cortisol was reduced to 60% by Tyr735Phe and Tyr735Val and was completely absent by Tyr735Ser. These data suggest that tyrosine 735 is important for ligand interpretation and transactivation.