The mechanisms that control the precisely regulated switch from gene repression to gene activation represent a central question in mammalian development. Here, we report that transcriptional activation mediated by liganded nuclear receptors unexpectedly requires the actions of two highly related F box/WD-40-containing factors, TBL1 and TBLR1, initially identified as components of an N-CoR corepressor complex. TBL1/TBLR1 serve as specific adaptors for the recruitment of the ubiquitin conjugating/19S proteasome complex, with TBLR1 selectively serving to mediate a required exchange of the nuclear receptor corepressors, N-CoR and SMRT, for coactivators upon ligand binding. Tbl1 gene deletion in embryonic stem cells severely impairs PPARgamma-induced adipogenic differentiation, indicating that TBL1 function is also biologically indispensable for specific nuclear receptor-mediated gene activation events. The role of TBLR1 and TBL1 in cofactor exchange appears to also operate for c-Jun and NFkappaB and is therefore likely to be prototypic of similar mechanisms for other signal-dependent transcription factors.