Thyroid hormone (T3) is a critical regulator of intestinal epithelial development and homeostasis, but its mechanism of action within the gut is not well understood. We have examined the molecular mechanisms underlying the T3 activation of the enterocyte differentiation marker intestinal alkaline phosphatase (IAP) gene. RT-PCR and Western blotting showed that thyroid hormone receptors TRalpha1 and TRbeta1 were expressed in human colorectal adenocarcinoma Caco-2 cells. Northern blotting detected expression of two IAP transcripts, which were increased approximately 3-fold in response to T3. Transient transfection studies with luciferase reporter plasmids carrying various internal and 5' deletion mutations of the IAP promoter localized a putative thyroid hormone response element (TRE) to a region approximately 620 nucleotides upstream (-620) of the ATG start codon. EMSAs using TRalpha1-retinoid X receptor alpha (RXRalpha) on sequential 5' and 3' single nucleotide deletions defined the TRE between -632 and -612 (5'-TTGAACTCAgccTGAGGTTAC-3'). Compared with the consensus TRE, the IAP-TRE is novel in that it contains an everted repeat of two nonamers (not hexamers) separated by three nucleotides. Neither TRalpha1 nor RXRalpha binds to the IAP-TRE; however, TRbeta1 binds to this TRE with minimal affinity. In the presence of TR and RXRalpha, only the TR-RXRalpha heterodimer binds to the IAP-TRE. Mutagenesis of either nonamer abolishes the biological activity of IAP promoter. We have thus identified a novel response element that appears to mediate the T3-induced activation of the enterocyte differentiation marker, intestinal alkaline phosphatase.