Retinoid X receptor (RXR)/retinoic acid receptor (RAR) heterodimers control gene expression through recruitment of co-repressors or co-activators, depending on their hormone binding status. We show that the helix 12 of RXRalpha and RARalpha is critical for recruitment of the co-regulators and transcriptional regulation by RXRalpha, RARalpha, and RXRalpha/RARalpha. LG268, an RXR-specific agonist, was able to promote co-activator association with the heterodimers, but was unable to dissociate co-repressors. Reconstitution experiments in yeast demonstrated that LG268 was capable of activating transcription by RXRalpha/RARalpha through recruitment of the co-activator. We hypothesize that the inability to release co-repressors from RXRalpha/RARalpha is responsible for the inability of LG268 to activate RXRalpha/RARalpha heterodimers in mammalian cells. Deletion of RARalpha helix 12 (RXRalpha/RARalpha Delta403) abolished both hormone-dependent dissociation from co-repressors and hormone-dependent association with co-activators. Deletion of RXRalpha helix 12 (RXRalpha Delta443/RARalpha) resulted in a higher binding affinity for co-repressors. Unexpectedly, RXRalpha Delta443/RARalpha also gained hormone-independent co-activator binding activity. Moreover, LG268 became an antagonist to RXRalpha Delta443/RARalpha heterodimers. These data suggest that the helix 12 of RXRalpha plays an inhibitory role in the recruitment of co-activators by unliganded RXRalpha/RARalpha.