Previous deletion analysis localized the major transactivation function of the human glucocorticoid receptor to a 185-amino acid segment close to the N terminus of the receptor protein. This region was named tau 1 [Hollenberg, S. M. & Evans, R. M. (1988) Cell 55, 899-906]. To delineate the smallest active region within tau 1, we have systematically tested the transactivation capacity of deletion derivatives of the tau 1 domain, fused to the glucocorticoid receptor DNA-binding domain, in yeast cells. Internal scanning deletions suggested that residues near the C terminus of tau 1 are most important for activity. Deletions of N terminal and C-terminal sequences identified a tau 1 amino acid ''core'' region near the C terminus of tau 1 that is crucial for tau 1 function. Small peptide fragments containing the tau 1 core region are competent for transactivation, while regions outside the tau 1. core are not active. We have previously demonstrated that the intact tau 1 domain squelches the activity of a minimal promoter in vivo and in vitro, suggesting involvement of interactions with a component/components of the basal transcription machinery in the mechanism of transactivation. This activity was maintained in the tau 1 core containing segments.