The thyroid hormone receptor splice variant, alpha2, is unable to bind thyroid hormone (T3) and has been proposed to function as an endogenous inhibitor of T3 action. In this report, we examined further the DNA sequence requirements for alpha2 binding to thyroid hormone response elements (TREs) in an attempt to identify response elements that mediate potent inhibition by alpha2. Heterodimers of alpha2 and retinoid X receptor were found to bind to a subset of TREs (DR4, direct repeats spaced by 4 bp) in which selected flanking and spacer sequences enhanced interactions with the AGGTCA core binding sequence. Despite the optimization of the TRE-binding sites, alpha2 remained a weak dominant negative inhibitor of TRE-driven transcription. A promoter interference assay was also developed for testing inhibition by alpha2. In these studies, alpha2 blocked gene transcription, but it required cotransfected retinoid X receptor, and it was not as potent as unliganded thyroid hormone receptors. These results led to the hypothesis that alpha2 might be deficient in interactions with nuclear receptor corepressors. Consistent with this view, alpha2 did not silence basal transcription in its native form or when linked to Gal4. Alpha2 also failed to interact with corepressors (NCoR and SMRT) in both gel shift assays and mammalian two-hybrid assays. We conclude that alpha2 is a weak antagonist of thyroid hormone action because it binds weakly to a limited repertoire of response elements, and it does not interact with corepressors. Thus, alpha2 may be able to compete with thyroid hormone receptors for binding to a limited group of target sites, but it is not able to actively inhibit transcription.