Diabetes is characterized by reduced thyroid function and altered myogenesis after muscle injury. Here we identify a novel component of thyroid hormone action that is repressed in diabetic rat muscle. Methodology/Principal Findings. We have identified a gene, named DOR, abundantly expressed in insulin-sensitive tissues such as skeletal muscle and heart, whose expression is highly repressed in muscle from obese diabetic rats. DOR expression is up-regulated during muscle differentiation and its loss-of-function has a negative impact on gene expression programmes linked to myogenesis or driven by thyroid hormones. In agreement with this, DOR enhances the transcriptional activity of the thyroid hormone receptor TRa1. This function is driven by the N-terminal part of the protein. Moreover, DOR physically interacts with TR a1 and to T3-responsive promoters, as shown by ChIP assays. T3 stimulation also promotes the mobilization of DOR from its localization in nuclear PML bodies, thereby indicating that its nuclear localization and cellular function may be related. Conclusions/Significance. Our data indicate that DOR modulates thyroid hormone function and controls myogenesis. DOR expression is down-regulated in skeletal muscle in diabetes. This finding may be of relevance for the alterations in muscle function associated with this disease.