The tau 2-region of steroid hormone receptors is a highly conserved region located at the extreme N-terminal end of the hormone-binding domain. A protein fragment encoding tau 2 has been shown to function as an independent transcriptional activation domain; however, because this region is essential for hormone binding, it has been difficult to determine whether the tau 2-region also contributes to the transactivation function of intact steroid receptors. In this study a series of amino acid substitutions were engineered at conserved positions in the tau 2-region of the mouse glucocorticoid receptor (mGR, amino acids 533-562) to map specific amino acid residues that contribute to the hormone-binding function, transcriptional activation, or both. Substitution of alanine or glycine for some amino acids (mutations E546G, P547A, and D555A) reduced or eliminated hormone binding, but the transactivation function of the intact GR and/or the minimum tau 2-fragment was unaffected for each of these mutants. Substitution of alanine for amino acid S561 reduced transactivation activity in the intact GR and the minimum tau 2-fragment but had no effect on hormone binding. The single mutation L550A and the double amino acid substitution L541G+L542G affected both hormone binding and transactivation. The fact that the S561A and L550A substitutions each caused a loss of transactivation activity in the minimum tau 2-fragment and the full-length GR indicated that the tau 2-region does contribute to the overall transactivation function of the full-length GR. Overall, the N-terminal portion of the tau 2-region (mGR 541-547) was primarily involved in hormone binding, whereas the C-terminal portion of the tau 2-region (mGR 548-561) was primarily involved in transactivation.