Nuclear receptors (NRs) are a large family of transcription factors. One hallmark of this family is the ligand-binding domain (LBD), for its primary sequence, structure, and regulatory function. To date, NRs have been found exclusively in animals and sponges, which has led to the generally accepted notion that they arose with them. We have overcome the limitations of primary sequence searches by combining sequence profile searches with structural predictions at a genomic scale, and have discovered that the heterodimeric transcription factors Oaf1/Pip2 of the budding yeast Saccharomyces cerevisiae contain putative LBDs resembling those of animal NRs. Although the Oaf1/Pip2 LBDs are embedded in an entirely different architecture, the regulation and function of these transcription factors are strikingly similar to those of the mammalian NR heterodimer peroxisome proliferator-activated receptor α/retinoid X receptor (PPARα/RXR). We demonstrate that the induction of Oaf1/Pip2 activity by the fatty acid oleate depends on oleate's direct binding to the Oaf1 LBD. The alteration of two amino acids in the predicted ligand-binding pocket of Oaf1 abolishes both ligand binding and the transcriptional response. Hence, LBDs may have arisen as allosteric switches, for example, to respond to nutritional and metabolic ligands, before the animal and fungal lineages diverged.