Thyroid hormones repress expression of APP (-amyloid precursor protein) in cultured cells of neuronal origin. The effect involves binding to the nuclear thyroid hormone receptor (TR) and is mediated by DNA sequences located within the first exon of the gene. These sequences contain a thyroid hormone receptor binding element (TRE) which is necessary but not sufficient to mediate the inhibitory effect of the thyroid hormone triiodothyronine (T3). In this report, we show that repression by T3 is mediated by a response unit composed by the TRE and 5'-flanking sequences that bind Sp1 and mediate stimulation by this transcription factor. In that unit binding sites for TR and Sp1 overlap and a complex mechanism appears to account for the TR-mediated regulation of APP. Unliganded TR does not bind to DNA, and allows Sp1 bind to DNA and stimulate APP basal expression. Binding of ligand T3, which increases affinity of TR by DNA, precludes binding of Sp1 to DNA and decreases the Sp1-dependent expression of APP.