Small molecule compounds that activate transcription of Nurr1-retinoid X receptor alpha (RXRα) (NR4A2-NR2B1) nuclear receptor heterodimers are implicated in the treatment of neurodegenerative disorders, but function through poorly understood mechanisms. Here, we show that RXRα ligands activate Nurr1-RXRα through a mechanism that involves ligand-binding domain (LBD) heterodimer protein-protein interaction (PPI) inhibition, a paradigm distinct from classical pharmacological mechanisms of ligand-dependent nuclear receptor modulation. NMR spectroscopy, PPI, and cellular transcription assays show that Nurr1-RXRα transcriptional activation by RXRα ligands is not correlated with classical RXRα agonism but instead correlated with weakening Nurr1-RXRα LBD heterodimer affinity and heterodimer dissociation. Our data inform a model by which pharmacologically distinct RXRα ligands (RXRα homodimer agonists and Nurr1-RXRα heterodimer selective agonists that function as RXRα homodimer antagonists) operate as allosteric PPI inhibitors that release a transcriptionally active Nurr1 monomer from a repressive Nurr1-RXRα heterodimeric complex. These findings provide a molecular blueprint for ligand activation of Nurr1 transcription via small molecule targeting of Nurr1-RXRα.