To understand the function of thyroid hormone nuclear receptors (TRs) in human hepatocellular carcinoma cells (HCC), we characterized the hormone binding and transactivational activity of TRs in a HCC cell line, J7. TR alpha 1 (J7-TR alpha 1) and TR beta 1 (J7-TR beta 1) complementary DNAs were cloned from this cell line, and the binding activity to the hormone response elements (TREs) and to the thyroid hormone, 3,3',5-triiodo-L-thyronine (T3) of the expressed TR proteins were evaluated. J7-TR alpha 1 and J7-TR beta 1 bound to TREs similarly as the TRs isolated from other tissues. However, J7-TR alpha 1 did not bind to T3, and J7-TR beta 1 bound to T3 with only about 10% the affinity of the wild-type TR beta 1. Sequencing of the complementary DNAs shows a single Met259Ile mutation in J7-TR alpha 1 and Met334Val in J7-TR beta 1. Using reporters containing TREs, we found that J7-TR alpha 1 and J7-TR beta 1 had virtually lost their transactivational activity. Moreover, these two mutants inhibited the transactivational activity of the wild-type TRs by a dominant negative effect not only on the transfected TRs, but also on endogenous TRs in other two HCC cell lines, SK-Hep-1 and HepG2. The potency of the dominant negative effect of these two mutants inversely correlated with the expression level of endogenous TRs. The present studies identified two novel naturally occurring TR mutants that have potent dominant negative action. The identification of both the alpha and beta dominant negative mutants in J7 made this cell line a useful model system to further understand the molecular mechanism of the dominant negative action of TR mutants.