Although PGC-1 (peroxisome proliferator-activated receptor-gamma coactivator-1) has been previously shown to enhance thyroid hormone receptor (TR)/retinoid X receptor-mediated ucp-1 gene expression in a ligand-induced manner in rat fibroblast cells, the precise mechanism of PGC-1 modulation of TR function has yet to be determined. In this study, we show that PGC-1 can potentiate TR-mediated transactivation of reporter genes driven by natural thyroid hormone response elements both in a ligand-dependent and ligand-independent manner and that the extent of coactivation is a function of the thyroid hormone response element examined. Our data also show that PGC-1 stimulation of TR activity in terms of Gal4 DNA-binding domain fusion is strictly ligand-dependent. In addition, an E457A AF-2 mutation had no effect on the ligand-induced PGC-1 enhancement of TR activity, indicating that the conserved charged residue in AF-2 is not essential for this PGC-1 function. Furthermore, GST pull-down and mammalian two-hybrid assays demonstrated that the PGC-1 LXXLL motif is required for ligand-induced PGC-1/TR interaction. This agonist-dependent PGC-1/TR interaction also requires both helix 1 and the AF-2 region of the TR ligand-binding domain. Taken together, these results support the notion that PGC-1 is a bona fide TR coactivator and that PGC-1 modulates TR activity via a mechanism different from that utilized with peroxisome proliferator activator receptor-gamma.