Thyroid hormone [3,5,3'-triodothyronine (T-3)] and retinoic acid (RA) receptors (T(3)Rs and RARs) are ligand-dependent transcription factors that regulate the transcription of T-3- and RA-responsive genes, respectively, by binding to specific DNA sequences as homodimers or as heterodimers with retinoid X receptors (RXRs). These T-3 and RA response elements are composed of two copies of the consensus half-site motif PuGGTCA. However, the specificity of the receptor complexes for response elements is dictated by their discrimination of the distance and the relative orientation of the half-sites. We found that both T(3)R-RXR and RAR-RXR heterodimers act functionally on all three response element configurations: direct repeats, palindromes, and inverted palindromes, On direct repeats, T(3)R-RXR and RAR-RXR heterodimers showed maximal trans-activation and in vitro DNA binding affinity when the core binding motifs were spaced by 4, 2, or 1 and 5 or 2 nucleotides, respectively, whereas both heterodimer types were mostly active on palindromes with no spacing. The binding of and trans-activation by T(3)R-RXR and RAR-RXR heterodimers on inverted palindromes was maximal with a half-site spacing of 5 or 6 and 7 or 8 nucleotides, respectively. Inverted palindromes, however, were the most specific response elements, because they were the only ones on which the activities of homodimeric and heterodimeric receptor complexes could be discriminated. We developed a model that suggests a sterical link between the optimal spacings observed with direct repeats and inverted palindromes. Taken together, the experimental data and the model provide further understanding of the regulation of T-3-and retinoid-responsive genes.