The Ski oncogene has dramatic effects on the differentiation of several different cell types. It induces the differentiation of quail embryo cells into myoblasts and arrests the differentiation of chicken hematopoietic cells. The mechanism that Ski uses to carry out these disparate biological activities is unknown. However, we were struck by the similarity of these effects to those of certain members of the nuclear hormone receptor family. Both Ski and the thyroid hormone receptor-derived oncogene v-ErbA can arrest the differentiation of avian erythroblasts, and v-Ski-transformed avian multipotent progenitor cells resemble murine hematopoietic cells that express a dominant-negative form of the retinoic acid receptor, RARalpha. In this paper, we have tested the hypothesis that v-Ski and its cellular homologue c-Ski exert their effects by interfering with nuclear hormone receptor-induced transcription. We demonstrate that Ski associates with the RAR complex and can repress transcription from a retinoic acid response element. The physiological significance of this finding is demonstrated by the ability of high concentrations of a RARalpha-specific ligand to abolish v-Ski-induced transformation of the multipotent progenitors. These results strongly suggest that the ability of Ski to alter cell differentiation is caused in part by the modulation of RAR signaling pathways.