The mechanisms underlying transcriptional activation are not very well understood, and knowledge is based on experiments with a small number of mostly viral activators. We have investigated the mechanism underlying transactivation by the activation domain present in the N-terminal part of retinoic acid receptor (RAR) beta 2 (AF-1). We show that RAR beta 2 phosphorylation is not crucial for its activity although it may modulate AF-1 activity. Sequential mutation of the negatively charged residues (Asp) resulted in a stepwise decrease in activity, while mutation of all aspartic acid residues resulted in complete loss of activity. Comparison of the critical region for activation with other activators revealed moderate homology with the viral activator VP16. The hydrophobic amino acids surrounding the negatively charged residues reported to be critical for activation by VP16 are all conserved in AF-1. The hydrophobic residues are required for AF-1, since mutation of these residues resulted in a decrease in activity. Furthermore, the activity of this activator, VP16 and TA1 of RelA, is squelched by overexpression of an AF-1-containing expression construct, indicating that AF-1 is an acidic activator. Squelching experiments further indicate that AF-1 and AF-2 function by different mechanisms. Comparison of activation functions present in the AB region of other members of the steroid/thyroid hormone receptor family: RAR alpha 2, RAR gamma 2, and GR suggested that also these receptors contain an acidic activation domain. The mechanism underlying activation by AF-1 is discussed.