The steroid binding domain of the rat glucocorticoid receptor is considered as extending from amino acids 550 to 795. However, such a synthetic protein (i.e. amino acids 547-795; Mr approximately 31,000) has been reported to show very little affinity for the potent synthetic glucocorticoid dexamethasone. We now disclose that digestion of steroid-free rat glucocorticoid receptors with low concentrations of trypsin yields a single species, of Mr = 16,000, that is specifically labeled by dexamethasone 21-mesylate. This 16-kDa fragment retains high affinity binding for [3H]dexamethasone that is only approximately 23-fold lower than that seen with the intact 98-kDa receptor. Analysis of the protease digestion patterns obtained both with trypsin and with lysylendopeptidase C allowed us to deduce the proteolytic cleavage maps of the receptor with these enzymes. From these protease maps, the sequence of the 16-kDa fragment was identified as being threonine 537 to arginine 673. These results show that glucocorticoid receptor fragments smaller than 34 kDa do bind steroids and that the amino acids Thr537-Arg673 constitute a core sequence for ligand binding within the larger steroid binding domain. The much slower kinetics in generating the 16-kDa fragment from affinity-labeled receptors suggests that steroid binding causes a conformation change in the receptor near the cleavage sites.