The transforming proteins of acute promyelocytic leukaemias (APL) are fusions of the promyelocytic leukaemia (PML) and the promyelocytic leukaemia zinc-finger (PLZF) proteins with retinoic acid receptor-α (RARα),. These proteins retain the RARα DNA- and retinoic acid (RA)-binding domains, and their ability to block haematopoietic differentiation depends on the RARα DNA-binding domain^,,,. Thus RA-target genes are downstream effectors,. However, treatment with RA induces differentiation of leukaemic blast cells and disease remission in PML–RARα APLs, whereas PLZF–RARα APLs are resistant to RA,. Transcriptional regulation by RARs involves modifications of chromatin by histone deacetylases, which are recruited to RA-target genes by nuclear co-repressors,. Here we show that both PML–RARα and PLZF–RARα fusion proteins recruit the nuclear co-repressor (N-CoR)–histone deacetylase complex through the RARα CoR box. PLZF–RARα contains a second, RA-resistant binding site in the PLZF amino-terminal region. High doses of RA release histone deacetylase activity from PML–RARα, but not from PLZF–RARα. Mutation of the N-CoR binding site abolishes the ability of PML–RARα to block differentiation, whereas inhibition of histone deacetylase activity switches the transcriptional and biological effects of PLZF–RARα from being an inhibitor to an activator of the RA signalling pathway. Therefore, recruitment of histone deacetylase is crucial to the transforming potential of APL fusion proteins, and the different effects of RA on the stability of the PML–RARα and PLZF–RARα co-repressor complexes determines the differential response of APLs to RA.