Cell-type-specific gene expression is physiologically modulated by the binding of transcription factors to genomic enhancer sequences, to which chromatin modifiers such as histone deacetylases (HDACs) are recruited. Drugs that inhibit HDACs are in clinical use but lack specificity. HDAC3 is a stoichiometric component of nuclear receptor co-repressor complexes whose enzymatic activity depends on this interaction. HDAC3 is required for many aspects of mammalian development and physiology, for example, for controlling metabolism and circadian rhythms. In this Review, we discuss the mechanisms by which HDAC3 regulates cell type-specific enhancers, the structure of HDAC3 and its function as part of nuclear receptor co-repressors, its enzymatic activity and its post-translational modifications. We then discuss the plethora of tissue-specific physiological functions of HDAC3.