Retinoid X receptors (RXRs) are members of the steroid and thyroid hormone receptor superfamily of hormone-dependent transcription factors that mediate the pleiotropic effect of retinoids. Here, we report the initial characterization of an isoform of hRXR beta, termed hRXR beta 3, which was previously identified as an H-2RI-IBP isoform (Epplen and Epplen, 1992), The hRXR beta 3 isoform cotains an in-frame insertion of four amino acids (SLSR) in the ligand binding domain at codon 419, The isoform is generated by alternate use of a 3' splice acceptor site and was detectable by reverse transcription polymerase chain reaction (RT-PCR) in all human tumor cell lines and mouse tissues examined. Chimeric receptors, in which the ligand-binding domain of hRXR alpha was substituted by the corresponding domain from hRXR beta 3, were used to investigate the consequences of the SLSR insertion on the transactivation and DNA-binding functions of the chimeric receptor. Co-transfection assays revealed that a chimera RXR alpha/beta 3 receptor failed to transactivate the RXR-specific CRBPII promoter, whereas the identical chimera lacking the SLSR insertion was active. The RXR alpha/beta 3 receptor exhibited dominant negative activity against active retinoid X and retinoic acid receptors on retinoid-responsive promoters. Moreover, the RXR alpha/beta 3 protein failed to interact physically with the retinoic acid receptor (RAR) to form heterodimers as detected by physical association assays, and failed to bind DNA containing an RAR-responsive element. Therefore, this suggests that the SLSR insertion in the ligand-binding domain of the RXR alpha/beta 3 receptor is responsible for the altered behavior of the chimera, Our findings raise the possibility that RXR alpha/beta 3, and perhaps hRXR beta 3 isoform, function by titrating a limiting adaptor molecule that is involved in mediating retinoid function.