The crucial role of retinoids in controlling differentiation processes has become evident from studies conducted in a variety of in vivo and in vitro systems. Most striking is the role of retinoic acid as a morphogenic substance in vertebrate limb development, but equally important is its role in the maintenance of epithelial integrity in most superficial linings of the body. The similarity of the mode of action of retinoids to that of the steroid and thyroid hormones has recently been demonstrated with the discovery of the nuclear receptors for retinoic acid, which belong to the steroid/thyroid hormone receptor superfamily. These receptors act as transcriptional activators by binding as heterodimers to specific nucleotide sequences in the response elements of target genes. Response elements for retinoic acid have so far been identified for the rat growth hormone and phosphoenolpyruvate carboxykinase, the mouse complement H and laminin B1, the human and mouse retinoic acid receptor beta, the human osteocalcin, and the human alcohol dehydrogenase genes. The retinoic acid response element (RARE) for the rat growth hormone gene is also a thyroid hormone response element (TRE), and the AP-1 binding site of the human osteocalcin promoter is also a vitamin D response element (VDRE) and a RARE. Both these elements are palindromic. Other RAREs have a direct repeat configuration of the half-site motif AGGTCA separated by five nucleotides (AGGTCA xxxxx AGGTCA). The direct repeat arrangement of the same core motif AGGTCA separated by three or four nucleotides becomes a VDRE or TRE, respectively. A point mutation has been identified in the RAR alpha gene of embryonal carcinoma cells resistant to retinoic acid. In addition to the three retinoic acid receptors (alpha, beta, gamma) belonging to the steroid/thyroid hormone receptor superfamily, a second class of retinoid receptors (RXR) alpha, beta, gamma has also been characterized and its relatedness to a gene, XR2C, of the locus ultraspiracle required for pattern formation in Drosophila has been established. That would suggest that both vertebrates and invertebrates may require similar transcriptional activators during morphogenesis. An RXRE has been identified in the CRBPII gene promoter and it contains five repeats of the canonical sequence AGGTCA separated by one nucleotide. The importance of retinoids, both as chemopreventive agents of tumorigenesis and potent differentiation inducers of neoplastic cells, can only be emphasized by the recent finding that the t(15;17) (q21- q11-22) translocation, specifically associated with acute promyelocytic leukemia, also causes translocation of the retinoic acid receptor alpha gene and its fusion with with a new locus, myl, of unknown function.(ABSTRACT TRUNCATED AT 250 WORDS)