To understand the molecular basis of the phosphorylation-enhanced transcriptional activity of human thyroid hormone nuclear receptor subtype beta 1 (hTR beta 1), we studied the effect of phosphorylation on the interaction of hTR beta 1 with the retinoid X receptor beta (RXR beta), we studied the effect of phosphorylation on the interaction of hTR beta 1 with the retinoid X receptor beta (RXR beta). In vitro, the extent of hTR beta 1.RXR beta heterodimer bound to various thyroid hormone response elements (TREs) was compared before and after phosphorylation of hTR beta 1. Without phosphorylation, hTR beta 1.RXR beta heterodimer was barely detectable under the experimental conditions. After phosphorylation of hTR beta 1, heterodimer bound to (i) the chicken lysozyme gene TRE, (ii) a TRE consisting of direct repeats of half-site binding motifs separated by four gaps, and (iii) a palindromic TRE was enhanced by approximately 10-, 7-, and 6-fold, respectively. The effect of phosphorylation on hTR beta 1.RXR beta heterodimerization was reversible. Dephosphorylation of the phosphorylated hTR beta 1 by alkaline phosphatase led to loss of the ability of hTR beta 1 to form a heterodimer with RXR beta in either the absence or the presence of DNA. These results indicate that the heterodimerization is enhanced by phosphorylation. To evaluate the effect of phosphorylation on the interaction of hTR beta 1 with RXR beta in vivo, we cotransfected hTR beta 1, RXR beta and TRE-chloramphenicol acetyltransferase (CAT) expression plasmids into CV-1 cells. CAT activity was assessed in the presence or absence of okadaic acid. Okadaic acid is a potent inhibitor of phosphatases 1 and 2A and increases the in vivo phosphorylation of hTR beta 1 by approximately 10-fold. Using the CAT reporter gene under control of the TRE from the malic enzyme gene, we found that RXR beta increased the okadaic acid-enhanced hTR beta 1-mediated CAT activity by 2- to 3-fold in the presence of 3,3',5-triiodo-L-thyronine. However, 9-cis-retinoic acid did not enhance the effect of okadaic acid. Our results indicate that phosphorylation is essential for the interaction of hTR beta 1 with RXR beta. Thus, phosphorylation plays a pivotal role in the gene-regulating activity of hTR beta 1.