Alternative splicing of the human glucocorticoid receptor gene generates a nonhormone binding splice variant (hGR beta) that differs from the wild-type receptor (hGR alpha) only at the carboxyl terminus. Previously we have shown that hGR beta inhibits the transcriptional activity of hGR alpha, which is consistent with reports of ele vated hGR beta expression in patients with generalized and tissue-specific glucocorticoid resistance. The potential role of hGR beta in the regulation of target cell sensitivity to glucocorticoids prompted us to further evaluate its dominant negative activity in other model systems and to investigate its mode of action. We demonstrate in multiple cell types that hGR beta inhibits hGR alpha-mediated activation of the mouse mammary tumor virus promoter. In contrast, the ability of the progesterone and androgen receptors to activate this promoter is only weakly affected by hGR beta. hGR beta also inhibits hGR alpha-mediated repression of an NF-kappa B-responsive promoter but does not interfere with homologous down-regulation of hGR alpha. We show that hGR beta can associate with the heat shock protein hsp90 although with lower affinity than hGR alpha. In addition, hGR beta binds GRE-containing DNA with a greater capacity than hGR alpha in the absence of glucocorticoids. Glucocorticoid treatment enhances hGR alpha, but not hGR beta, binding to DNA. Moreover, we demonstrate that hGR alpha and hGR beta can physically associate with each other in a heterodimer. Finally, we show that the dominant negative activity of hGR beta resides within its unique carboxyl-terminal 15 amino acids. Taken together, our results suggest that formation of transcriptionally impaired hGR alpha-hGR beta heterodimers is an important component of the mechanism responsible for the dominant negative activity of hGR beta.