A novel isoform of rat estrogen receptor (ER) beta, ER beta 2, which is a putative alternative splicing product of the reported ER beta (ER beta 1) has been identified. Rat ER beta 2 cDNA contains an additional, in-frame 54 base pair insertion in the ligand binding domain of ER beta 1, which generates an 18 amino acid residue insertion. Northern blot and RT-PCR analyses revealed that ER beta 2 coexists with ER alpha and ER beta 1 in all tissues examined including brain, lung, liver, kidney, fat, bone, uterus, prostate, and ovary. The insertion caused loss of ligand binding activity of ER beta 2, whereas the ability to bind the palindromic estrogen response element (ERE) was retained. In an ERE-containing luciferase reporter gene assay using COS-1 cells, ER beta 2 failed to activate estrogen-dependent transcription. Furthermore, ER beta 2 dose dependently suppressed the ER alpha- and ER beta 1-mediated transcriptional activation. These results suggest that rat ER beta 2 functions as a negative regulator of estrogen action.