Retinoids are important signals in brain development. They regulate gene transcription by binding to retinoic acid receptors (RAR) and, as was discovered recently, a peroxisome proliferator-activated receptor (PPAR). Traditional ligands of PPAR are best known for their functions in lipid metabolism and inflammation. RAR and PPAR are ligand-activated transcription factors, which share members of the retinoid X receptor (RXR) family as heterodimeric partners. Both signal transduction pathways have recently been implicated in the progression of neurodegenerative and psychiatric diseases. Since inflammatory processes contribute to various neurodegenerative diseases, the anti-inflammatory activity of retinoids and PPARgamma agonists recommends them as potential therapeutic targets. In addition, genetic linkage studies, transgenic mouse models and experiments with vitamin A deprivation provide evidence that retinoic acid signaling is directly involved in physiology and pathology of motoneurons, of the basal ganglia and of cognitive functions. The activation of PPAR/RXR and RAR/RXR transcription factors has therefore been proposed as a therapeutic strategy in disorders of the central nervous system.