The v-erbA oncoprotein represents a retrovirus-transduced oncogenic version of the thyroid hormone (T3/T4) receptor c-erbA (type alpha). It contributes to virus-induced erythroleukemia by efficiently arresting differentiation of red cell progenitors and by suppressing transcription of erythrocyte-specific genes. Here, we show that v-erbA and c-erbA bind directly to sequences within the promoter of the erythrocyte-specific carbonic anhydrase II (CAII), a gene whose transcription is efficiently suppressed by v-erbA. This erbA-binding site confers thyroid hormone responsiveness to a heterologous promoter in transient expression experiments and is a target for efficient down-regulation of CAII transcription by the v-erbA oncoprotein. In stably transformed erythroblasts coexpressing the v-erbA oncoprotein and the c-erbA/T3 receptor at an approximately equimolar ratio, c-erbA activity is dominant over v-erbA. T3 efficiently induced erythroid differentiation in these cells, thus overcoming the v-erbA-mediated differentiation arrest. Likewise, T3 activated CAII transcription as well as transient expression of a T3-responsive reporter gene containing the CAII-specific erbA-binding site. The c-erbA-dependent activation of this CAII reporter construct could only be suppressed by very high amounts of v-erbA. Our results suggest that overexpression of v-erbA is required for its function as an oncoprotein.