The effects of retinoids on gene regulation are mediated by retinoic acid receptors (RARs) and retinoid X receptors (RXRs). Here, we provide the first biochemical evidence that, in vitro, ligand governs the transcriptional activity of RXR alpha/RAR alpha by inducing conformational changes in the ligand-binding domains. Using limited proteolytic digestion we show that binding of the cognate ligand causes a conformational change in the carboxy-terminal part of the receptor. We also show that recombinant RXR alpha/RAR alpha is partially active in the absence of exogenously added ligand. Trans-activation depends critically on the ligand-dependent transcriptional activation function AF-2 of RAR alpha. Full activation by recombinant RXR alpha/RAR alpha, however, requires the addition of either all-trans RA, 9-cis RA, or other RAR-specific agonists, whereas an RAR alpha-specific antagonist abolishes trans-activation. Intriguingly, the ligand-dependent AF-2 of RXR does not contribute to the level of transcription from the RAR beta 2 promoter in vitro even when the cognate ligand (9-cis RA) is bound. Thus, the major role of RXR in trans-activation of the RAR beta 2 promoter is to serve as an auxiliary factor required for the binding of RAR which, in turn, is directly responsible for transcriptional activity.