Retinoids are essential for normal development and both deficiency and excess of retinoic acid (RA) are teratogenic. Retinoic acid response elements (RAREs) have been identified in Hox gene promoters suggesting that endogenous retinoids may be involved in the direct control of Hox gene patterning functions. In order to test this hypothesis, we have mutated the Hoxa-1 3'RARE using the Cre-loxP targeting strategy, and studied its functional role during mouse development. We find that this enhancer plays an important role in the early establishment of the Hoxa-1 anterior expression boundary in the neural plate. This early disturbance in Hoxa-1 activation results in rhombomere and cranial nerve abnormalities reminiscent of those obtained in the Hoxa-1 total knockout, although their severity and penetrance are lower, thus providing strong evidence for direct control of Hox gene function by retinoids during normal development. Interestingly, we also find that the Hoxa-1 expression response to RA treatment is not entirely controlled by the RARE, suggesting the existence of other retinoid-induced factors mediating the Hoxa-1 response to RA and/or the presence of additional RAREs. Interestingly, although the RARE is not required for the spatiotemporal control of colinear expression of the Hoxa genes, it is absolutely required for correct Hoxa-2 expression in rhombomere 5.