Retinoic acid (RA) is a potent inducer of differentiation of embryonal carcinoma PCC4.aza1R cells into mesenchymal stem cells. Induction of Hoxa-1, Hoxa-5, cellular retinoic acid-binding protein (CRABP) I and II, and retinoic acid receptor (RAR)-beta expression occurs early in this multistage program of differentiation. RA is also a potent inducer of these genes in the differentiation-defective mutant PCC4(RA)-1; however, RA is much less effective in the mutant cell line PCC4(RA)-2. The up-regulation of several of these genes by RA is, at least in part, due to increased transcription. It is likely that some of these changes are mediated either directly or indirectly by nuclear retinoid receptors. Previously, we characterized the expression of RARs in PCC4.aza1R and (RA)-1 and (RA)-2 cells. In this study, we show that these cells also express retinoid X receptor (RXR)-alpha, RXR-beta, and RXR-gamma and that RA treatment down-regulates the expression of RXR-gamma. No large differences were found in RXR mRNA expression between parental and mutant cell lines except that PCC4(RA)-1 cells expressed an 8-fold higher level of RXR gamma mRNA than the parental cells. To obtain more insight into the retinoid signaling pathways involved in the regulation of this pathway of differentiation, we examined the action of two retinoid receptor-selective agonists and one antagonist. The RAR-selective retinoid SRI-6751-84 is a very effective inducer of transactivation of beta RARE-tk-LUC, but not of RXRE-tk-CAT, in PCC4.aza1R cells and is a very potent inducer of morphological differentiation and Hoxa-1, Hoxa-5, CRABP II, and RAR-beta expression. In contrast, the RXR-selective retinoid SR11,217, which transactivates the RXRE-tk-CAT effectively, but beta RARE-tk-LUC poorly, is unable to induce differentiation and has little effect on the expression of these early genes. The RAR-alpha-selective antagonist Ro 41-5253, which inhibits RARE-dependent transcriptional activation, has by itself no effect on the differentiation of PCC4.aza1R cells. However, this antagonist is able to block the induction of morphological differentiation by the RAR-selective retinoid as well as the expression of Hoxa-1, Hoxa-5, CRABP II, and RAR-beta. Our data suggest that the activation of RAR signaling pathways is important in initiating the cascade of changes in gene expression that result in the differentiation of PCC4.aza1R into mesenchymal stem cells. In addition, we demonstrate that the two mutant cell lines, PCC4(RA)-1 and PCC4(RA)-2, are defective at different stages of the differentiation program.