Retinoic acid (RA) is required for normal airway epithelial cell growth and differentiation both in vivo and in vitro. One of the earliest events following the exposure of bronchial epithelial cells to RA is the strong induction of RA receptor beta (RAR beta) mRNA. Previous work established that many lung cancer cell lines and primary tumors display abnormal RAR beta mRNA expression, most often absence or weak expression of the RAR beta 2 isoform, even after RA treatment. Restoration of RAR beta 2 into RAR beta-negative lung cancer cell lines has been reported to inhibit tumorigenicity. Since RAR beta 2 inactivation may contribute to lung cancer, we have investigated the molecular mechanism of defective RAR beta 2 expression. Nuclear run-on assays and transient transfections with RAR beta 2 promoter constructs indicate the presence of trans-acting transcriptional defects in most lung cancer cell lines, which map to the RA response element (RARE). These defects cannot be complemented by RAR-retinoid X receptor cotransfection and can be separated into two types: (i) one affecting transcription from direct repeat RAREs, but not palindromic RAREs, and (ii) another affecting transcription from both types of RARE. Studies using chimeras between RAR alpha, TR alpha, and other transcription factors suggest the existence of novel RAR-thyroid hormone receptor AF-2-specific cofactors, which are necessary for high levels of transcription. Furthermore, these factors may be frequently inactivated in human lung cancer.