A combination of the gel retardation assay and interference by hydroxyl radical modification (missing nucleoside technique) was used to analyze the interaction of the glucocorticoid receptor (GR) with various glucocorticoid responsive elements (GRE). Short oligonucleotides containing the 15-bp GRE and 1 to 3 flanking base pairs on each side, are bound with very low affinity. The same GREs, when positioned in the center of a large DNA fragment (40-50 bp), show high affinity for the receptor. However, when the GRE is positioned at the border of a 54-bp fragment, the affinity of the GR for the GRE decreases markedly. The DNA binding affinity increases linearly with each added flanking base pair and optimal binding is observed with 8-10 flanking bp. Thus, the nonconserved DNA sequences flanking the GRE contribute significantly to the free energy of receptor binding to DNA. Using larger DNA fragments (greater than 100 bp) and a smaller form of the receptor (40 kD), two retarded complexes are found that correspond to monomeric and homodimeric receptor DNA complexes. The DNA-binding domain of the GR (20 kD), expressed in bacteria, binds to the GRE as a monomer as well as a dimer and can form heterodimers with the native 94-kD GR. Insertion or deletion of one single base pair between the two halves of the GRE reduces the affinity for the homodimeric form of the native GR, and inhibits the function of the GRE in gene transfer experiments, suggesting that a dimer of the GR is the functional entity that binds to the GRE.