Sufficient knowledge of transcription factor structure and function has accumulated to allow attempts at the rational design of novel transcription factors for the study of gene regulation and potential application in gene therapy. In the present studies, we have systematically evaluated the function of chimeric retinoid receptors generated by fusion with the transactivation domain of VP16 and expression in adenovirus vectors. By varying the location of fusion of the VP16 transactivation domain with the retinoic acid receptor (RAR) or retinoid X receptor (RXR), marked differences in the specificity of gene activation were obtained. Although several chimeric proteins activated both RAR and RXR target genes, fusion of the NT16 transactivation domain to the N terminus of RAR permitted specific activation of reporter genes containing retinoic acid response elements. In contrast, fusion of the VP16 transactivation domain to the C terminus of RXR permitted specific activation of reporter genes containing RXR response elements. When tested for their ability to activate chromosomal targets, the chimera consisting of VP16 linked to the N terminus of PAR was much more active in promoting the differentiation of HL-60 cells and NTera-2 cells than the chimera consisting of VP16 linked to the C terminus of RXR. These observations support the existence of two distinct retinoid signalling pathways predicted on the basis of biochemical and pharmacologic studies and provide direct evidence that the programs of differentiation elicited by retinoic acid in these cells are mediated by a specific subset of binding sites for RAR-RXR heterodimers. VP16-RAR and VP16-RXR fusion proteins should be of further use in dissecting the relative contributions of RARs and RXRs to specific programs of gene expression. Constitutive retinoid receptors may also be considered for use as novel tumor suppressor genes for genetically based treatment of retinoid-responsive cancers.