Retinoids regulate various aspects of vertebrate development through the action of two types of receptors, the retinoic acid receptors (RARs) and the retinoid-X-receptors (RXRs). Although RXRs bind 9-cis-retinoic acid (9cRA) with high affinity, in vitro experiments suggest that RXRs are for the most part not liganded, but serve as auxiliary factors forming heterodimers with liganded partner receptors such as RAR. Here we have used RXR- and RAR-specific ligands 4-[1-(3,5,5,8,8-pentamethyl-5,6,7,8- tetrahydro -2-napthyl)ethenyl] benzoic acid (LG69) and (E)-4-[2-(5,5,8,8-tetramethyl-5,6,7,8-tetrahydro-2- naphthalenyl)-1-propenyl]benzoic acid (TTNPB), and show that, in the context of an embryo, liganded RXR can mediate retinoid signal transduction. This conclusion emerges from examining the induction of several retinoid-responsive genes in the limb bud (Hoxb-6/-8, RAR beta) and in the developing central nervous system (Hoxb-1, otx-2). RAR beta and Hoxb-1 genes were most effectively activated by a combination of TTNPB and LG69, suggesting that the activation of these genes benefits from the presence of ligand-bound RAR and ligand-bound RXR. Hoxb-6/-8 genes were most efficiently induced by LG69, suggesting that liganded RXR can activate these genes. The regulation of the expression of the otx-2 gene was complex; expression was repressed by TTNPB, but such repression was relieved when LG69 was provided together with TTNPB, suggesting that ligand-bound RXR can overcome repression of transcription exerted by liganded RAR. Based on these findings, we propose that in our experimental system in which ligands are provided exogenously, transcriptional regulation of several genes involves liganded RXR.