Thyroid hormone plays an important role in brain development and is essential to ensure a normal myelination. The effects of thyroid hormone are mediated by nuclear thyroid hormone receptors, which act as ligand‐regulated transcription factors. There are several isoforms encoded by two genes, α and β. Developmental studies have shown that α isoforms are widely expressed in the fetal brain, while β isoforms expression is more restricted with a dramatic increase that begins at birth in the rat. Remarkably, receptor number reaches maximal levels by postnatal day 10, when serum thyroid hormone levels also peak and myelination is the most prominent event in the developing rat brain. Likewise, oligodendrocyte precursor cells express α isoforms and expression of the β isoforms is confined to the differentiated oligodendrocytes, suggesting that these isoforms might mediate different thyroid hormone effects in the oligodendrocyte lineage. Thyroid hormone acts at multiple steps in the development of oligodendrocytes: (a) Early in development, it can function as an instructive signal for the generation of oligodendrocytes and enhance the proliferation of the committed preprecursor oligodendrocyte cells. (b) Thyroid hormone regulates the number of oligodendrocyte generated by directly promoting their differentiation. Since oligodendrocytes are produced in vitro after the same period in culture regardless of whether thyroid hormone was added to the cultures, it has been suggested that thyroid hormone is required for neither the timing nor the generation of oligodendrocytes, but is necessary to achieve adequate oligodendrocyte numbers. (c) Finally, thyroid hormone increases morphological and functional maturation of postmitoitic oligodendrocytes by stimulation of the expression of various myelin genes. © 1999 John Wiley & Sons, Inc. J Neurobiol 40: 497–512, 1999