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-alpha (RAR alpha)(1,2). These proteins retain the RAR alpha DNA- and retinoic acid (RA)-binding domains, and their ability to block haematopoietic differentiation depends on the RAR alpha DNA-binding domain(3-6), Thus RA-target genes are downstream effectors(7,8). However, treatment with RA induces differentiation of leukaemic blast cells and disease remission in PML-RAR alpha APLs, whereas PLZF-RAR alpha APLs are resistant to RA(1,2), Transcriptional regulation by RARs involves modifications of chromatin by histone deacetylases, which are recruited to RA-target genes by nuclear co-repressors(9,10), Here we show that both PML-RAR alpha and PLZF-RAR alpha fusion proteins recruit the nuclear co-repressor (N-CoR)-histone deacetylase complex through the RAR alpha CoR box, PLZF-RAR alpha contains a second, RA-resistant binding site in the PLZF amino-terminal region, High doses of RA release histone deacetylase activity from PML-RAR alpha, but not from PLZF-RAR alpha. Mutation of the N-CoR binding site abolishes the ability of PML-RAR alpha to block differentiation, whereas inhibition of histone deacetylase activity switches the transcriptional and biological effects of PLZF-RAR alpha 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-RAR alpha and PLZF-RAR alpha co-repressor complexes determines the differential response of APLs to RA.