Nutrients, drugs, and hormones influence transcription during differentiation and metabolism by binding to high-affinity nuclear receptors. In the absence of ligand, some but not all nuclear receptors repress transcription as a heterodimer with retinoid X receptor (RXR). Here we define a novel role for helix 12 (H12) in sterically masking the corepressor (CoR) binding site in apo-RXR. Removing H12 converts RXR to a potent transcriptional repressor. The length but not the specific sequence of H12 is critical for masking RXR’s intrinsic repression function. This contrasts with the amphipathic character required for mediating ligand-dependent activation and coactivator recruitment. Physiologically, we show that heterodimerization of RXR with apo-thyroid hormone receptor (TR) unmasks the CoR binding site in RXR and allows the TR-RXR heterodimer to repress. A molecular mechanism that involves sequence-specific interaction between RXR H12 and the coactivator-binding surface of the nuclear receptor is proposed for this heterodimerization-mediated unmasking. Peroxisome proliferator-activated receptor γ does not interact as well with RXR H12, thus explaining its inability to repress transcription as an RXR heterodimer. The requirement to unmask RXR’s latent repression function explains why only certain RXR partners repress transcription.