We have identified a new retinoid response pathway through which 9-cis retinoic acid (9cRA) activates transcription in the presence of LXR alpha, a member of the nuclear receptor superfamily. LXR alpha shows a specific pattern of expression in visceral organs, thereby restricting the response to certain tissues. Retinoid trans-activation occurs selectively on a distinct response element termed an LXRE. Significantly, neither RXR homodimers nor RXR/RAR heterodimers are able to substitute for LXR alpha in mediating this retinoid response. We provide evidence that the retinoid response on the LXRE is the result of a unique interaction between LXR alpha and endogenous RXR, which, unlike in the RXR/RAR heterodimer, makes RXR competent to respond to retinoids. Thus, the interaction with LXR alpha shifts RXR from its role described previously as a silent, DNA-binding partner to an active ligand-binding subunit in mediating retinoid responses through target genes defined by LXREs.