Steroid hormone receptors are ligand‐inducible transcription factors that exhibit potent effects on gene expression in living cells. Precise dissection of their mode of action at the molecular level can best be carried out in functional cell‐free systems. This article will describe the benefits of such systems and review their development up to the recent establishment of steroid receptor‐dependent in vitro transcription. Subsequent advances in our knowledge of receptor function arising from the exploitation of this powerful experimental tool will be described. (...) Particular emphasis will be placed upon two key problems: the role of steroid hormone in receptor action and the mechanisms by which steroid receptors activate gene transcription. (shrink)