The diverse effects of retinoids on the development, growth, and homeostasis of vertebrate organisms are mediated in part by three distinct isoforms of retinoic acid receptors (RARs). These proteins, which are structurally and functionally closely related to thyroid hormone receptors and the oncogene product v-ErbA, regulate patterns of gene expression in target tissues. One approach to study the distinct effects of retinoic acid in cells is to subvert this activity of endogenous receptors by expression of dominant negative receptor derivatives. We demonstrate here that RAR alpha, RAR beta, and RAR gamma can be converted into potent negative transcriptional regulators that block wild-type RAR function. Furthermore, these mutant RARs, but not the wild-type receptors, actively repress the basal transcription level of target promoters. When expressed in transgenic mice, the most potent of these inhibitory receptor mutants is apparently able to disturb developmental processes by inducing a cleft palate in transgenic offspring.