2,3,7,8-Tetrachlorodibenzo-p-dioxin (TCDD) and related halogenated aromatic hydrocarbons (HAHs) are highly toxic to most vertebrate animals, but there are dramatic differences in sensitivity among species and strains. Aquatic birds including the common tern (Sterna hirundo) are highly exposed to HAHs in the environment, but are up to 250-fold less sensitive to these compounds than the typical avian model, the domestic chicken (Gallus gallus). The mechanism of HAH toxicity involves altered gene expression subsequent to activation of the aryl hydrocarbon receptor (AHR), a basic helix-loop-helix-PAS transcription factor. AHR polymorphisms underlie mouse strain differences in sensitivity to HAHs and polynuclear aromatic hydrocarbons, but the role of the AHR in species differences in HAH sensitivity is not well understood. Here, we show that although chicken and tern AHRs both exhibit specific binding of [3H]TCDD, the tern AHR has a lower binding affinity and exhibits a reduced ability to support TCDD-dependent transactivation as compared to AHRs from chicken or mouse. We further show through use of chimeric AHR proteins and site-directed mutagenesis that the difference between the chicken and tern AHRs resides in the ligand-binding domain and that two amino acids (Val-325 and Ala-381) are responsible for the reduced activity of the tern AHR. Other avian species with reduced sensitivity to HAHs also possess these residues. These studies provide a molecular understanding of species differences in sensitivity to dioxin-like compounds and suggest an approach to using the AHR as a marker of dioxin susceptibility in wildlife.