Signal transduction by dioxin (2,3,7,8-tetrachloro-dibenzo-p-dioxin) is mediated by the intracellular dioxin receptor which, in its dioxin-activated state, regulates transcription of target genes encoding drug metabolizing enzymes such as cytochrome P-450IA1 and glutathione S-transferase Ya. Upon binding of dioxin the receptor translocates from the cytoplasm to the nucleus in vivo and is converted from a latent non-DNA binding form to a species which binds to dioxin-responsive positive control elements in vitro. The latent receptor form is associated with an inhibitory protein (the 90-kDa heat shock protein, hsp90), the release of which is necessary to unmask the DNA binding activity of the receptor. Here we have established a protocol to disrupt the hsp90-receptor complex in the absence of ligand. We show that it was possible to covalently cross-link with dioxin only the hsp90-associated form of dioxin receptor. In contrast, the disrupted hsp90-free form of receptor did not form a stable complex with dioxin but bound DNA constitutively. Moreover, we could partially reconstitute the ligand binding activity of the salt-disrupted hsp90-free dioxin receptor by incubation with hsp90-containing reticulocyte lysate but not by incubation with wheat germ lysate which lacks immuno-detectable levels of hsp90. Thus, we demonstrate that the dioxin receptor loses its high affinity ligand binding activity following release of hsp90 and that it is possible to reverse this process. In conclusion, hsp90 appears to play dual roles in the modulation of functional activities of the dioxin receptor: (i) it represses the intrinsic DNA binding activity of the receptor and (ii) it appears to determine the ability of the receptor to assume and/or maintain a ligand binding conformation.