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 beta3, which was previously identified as an H-2RIIBP isoform (Epplen and Epplen, 1992). The hRXR beta3 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 beta3, 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/beta3 receptor failed to transactivate the RXR-specific CRBPII promoter, whereas the identical chimera lacking the SLSR insertion was active. The RXR alpha/beta3 receptor exhibited dominant negative activity against active retinoid X and retinoic acid receptors on retinoid-responsive promoters. Moreover, the RXR alpha/beta3 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/beta3 receptor is responsible for the altered behavior of the chimera. Our findings raise the possibility that RXR alpha/beta3, and perhaps hRXR beta3 isoform, function by titrating a limiting adaptor molecule that is involved in mediating retinoid function.