The Ah receptor binds 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD) and related aryl hydrocarbons and mediates their biochemical and toxic effects by modifying gene expression. In order to interact with DNA, the TCDD.receptor complex must undergo a poorly understood transformation to a form which is distinguishable by its increased affinity for DNA-Sepharose and for its specific enhancer element upstream from the cytochrome P450IA1 gene. We have found that this transformation process is inhibited in vitro by treatment of rat hepatic cytosol with activated charcoal prior to addition of [3H]TCDD. The transformed form of the receptor can be generated in the charcoal-inhibited cytosol by incubation with hepatic cytosol from either DBA/2J mice (in which [3H]TCDD-specific binding is undetectable under these conditions) or rat (in which Ah receptor was prebound with unlabeled ligand). Transformation is observed whether this addition occurs before or after [3H]TCDD is bound to the charcoal-treated receptor. Thus, transformation is (i) mediated by some additional cytosolic component(s) and (ii) separable from ligand binding. The untransformed [3H]TCDD.receptor complex, isolated by DNA-Sepharose chromatography, can also be transformed if DBA mouse hepatic cytosol is added. This partially purified untransformed receptor preparation and gel retardation analysis were used to further characterize the transforming activity in DBA cytosol. We observed that the "Ah receptor transforming factor" is heat-labile, trypsin-sensitive, removed or inactivated by charcoal, of greater than approximately 50 kDa, and elutes from Superose at a Rs of approximately 6 nm. In conjunction with our previous studies documenting the increased molecular weight of the transformed compared to the untransformed Ah receptor, and identifying the heteromeric structure of the transformed receptor, we postulate that the ligand-binding subunit (the untransformed receptor) must associate tightly with another cytosolic protein, which is also present in the receptor-defective DBA mouse, in order to transform to the transcriptionally active receptor.