To investigate mechanisms responsible for positive and negative transcriptional control, we have utilized two types of promoters that are differentially regulated by thyroid hormone (T3) receptors. Promoters containing the palindromic T3 response element TCAGGTCA TGACCTGA are positively regulated by the T3 receptor after the administration of T3, whereas otherwise identical promoters containing the estrogen response element TCAGGTCA CTG TGACCTGA can be regulated negatively; converse effects are observed with the estrogen receptor. We describe evidence that the transcriptional inhibitory effects of the T3 or estrogen receptors on the estrogen or T3 response elements, respectively, are imposed by amino acid sequences in the C'-terminal region that colocalize with dimerization and hormone-binding domains and that these sequences can transfer inhibitory functions to other classes of transcription factors. Removal of the C'-terminal dimerization and hormone-binding domains of either the alpha T3 or estrogen receptors permits each receptor to act constitutively to enhance transcription on both T3 and estrogen response elements. It is, therefore, suggested that protein-protein interactions between receptor C' termini limit the subset of DNA binding sites on which transcriptional activation occurs.