Recent evidence suggests that extranuclear action of retinoid receptors is involved in mediating the pleiotropic effects of retinoids. However, whether they reside in the cytoplasm remains elusive. Here, we showed that retinoic acid receptor-gamma (RARgamma) was cytoplasmic in confluent cells, or when cells were released from serum depletion or treated with growth factors. In studying the regulation of RARgamma subcellular localization, we observed that ectopically overexpressed RARgamma was mainly cytoplasmic irrespective of serum concentration and cell density. The cytoplasmic retention of RARgamma was inhibited by ligand retinoic acid (RA). In addition, coexpression of retinoid X receptor-alpha (RXRalpha) resulted in nuclear localization of RARgamma through their heterodimerization. Mutagenesis studies revealed that a C-terminal fragment of RXRalpha potently prevents RA-induced RARgamma nuclear localization and transcriptional function. Furthermore, our results showed that the cytoplasmic retention of RARgamma was due to the presence of its unique N-terminal A/B domain, which was subject to regulation by p38 MAPK-mediated phosphorylation. Deletion or mutation of the N-terminal A/B domain largely impaired its cytoplasmic localization. Together, our data demonstrate that the subcellular localization of RARgamma is regulated by complex interactions among ligand binding, receptor phosphorylation, and receptor dimerizations.