The dioxin (aryl hydrocarbon) receptor is a ligand-dependent transcription factor that induces expression of a number of genes encoding drug metabolizing enzymes. In the absence of ligand the dioxin receptor is present in the cytoplasmic compartment of the cell associated with the molecular chaperone hsp90, which has been implicated in regulating the correct folding of the ligand binding domain of the receptor. In this study we have examined a potential role of the hsp90-associated p23 protein in the activation process of the dioxin receptor to a DNA binding form. In an in vitro model we show that addition of ligand alone to the dioxin receptor fails to induce release of hsp90 from the dioxin receptor. In the presence of ligand, this release was, however, induced upon addition of purified preparations of Arnt. Interestingly, p23 was also found to be associated with the nonactivated form of the dioxin receptor. Following fractionation on sucrose gradients p23 was dissociated from the receptor-hsp90 complex generating a receptor form, which showed ligand-independent release of hsp90 by Arnt and, consequently, ligand-independent activation of the DNA binding activity of the dioxin receptor. Ligand dependence was reconstituted in the presence of molybdate, a transition metal ion known to stabilize the interaction between the molecular chaperone hsp90 and p23. Taken together these experiments suggest a role of p23 in modulating ligand responsiveness in the activation process of the dioxin receptor.