Thyroid hormone receptors (TSRs) are hormone-regulated transcription factors. Different T3R isoforms are expressed in a tissue-specific and developmentally regulated manner. The T3R alpha-1, beta-0, and beta-1 isoforms typically repress target gene expression in the absence of hormone and activate transcription in the presence of hormone, intriguingly, however, the T3R beta-2 isoform fails to repress, and instead is able to activate transcription in both the absence and presence of hormone. We investigated the molecular mechanism behind this absence of repression by T3R beta-2. Repression by T3R alpha-1, beta-0, and beta-1 is mediated by the ability of these isoforms to physically recruit a SMRT/N-CoR corepressor complex. We determined that the unliganded T3R beta-2 also recruits the SMRT corepressor; in contrast to the alpha-1, beta-0, and beta-1 isoforms, however, the T3R beta-2 protein interacts not only with the C-terminal "receptor-interaction domain" of SMRT, but also makes additional contacts with the N-terminal "silencing domain" of the SMRT corepressor. These additional, T3R beta-2-specific contacts interfere with the subsequent association of SMRT with mSin3, a crucial second subunit of the corepressor holocomplex. Our results suggest that T3R beta-2 regulates transcription through a novel anti-repression mechanism, recruiting SMRT, but preventing the subsequent formation of a functional corepressor complex.