Steroid hormones, when complexed to their receptors, recognize and bind specific DNA sequences and subsequently induce increased levels of transcription. The mechanisms of steroid hormone action were analyzed by constructing chimeric DNA molecules from portions of mouse mammary tumor virus envelope and long terminal repeat (LTR) regions ligated to the thymidine kinase (tk) gene of herpes simplex virus. This construction allowed the tk gene to be expressed in a hormone-responsive fashion upon transfection into Ltk- cells. Comparison of transcription data with in vitro binding data showed that hormone-responsive transcription can be directly correlated to the presence of steroid hormone receptor binding sites on the DNA. There are at least two such receptor binding sites in the LTR region, one between -202 and -137 and another between -137 and -50 base pairs from the RNA cap site, as well as a site near the 5' end of the envelope region. These results strengthen the hypothesis that steroid-receptor complexes regulate genes primarily by binding to DNA sites near the promoter region and thereby modulate transcription.