Hsp90, p23 and other chaperosome proteins are critical for the function of several enzymes and steroid hormone receptors. The dioxin receptor (DR) is an Hsp90-regulated transcription factor that binds numerous toxic ligands, including the environmental contaminant 2,3,7,8-tetrachlorodibenzo(p)dioxin. We used a yeast model system that expressed human DR and Arnt proteins to test whether p23 affected DR signaling. Deletion of the SBA1 gene (yeast p23 homolog) in this model system reduced ligand-mediated DR signaling by approximately 40% and shifted the EC(50) of the beta-napthoflavone ligand by five-fold in a reporter gene assay. DR signaling was restored in the sba1 strain by a plasmid-borne SBA1 gene, confirming that the signaling defect was due to SBA1. The human p23 protein substituted for yeast Sba1 protein in this model system. These genetic data show that p23 enhances DR signaling.