Acute promyelocytic leukemia (APL) cases expressing the t(15,17) product, promyelocytic leukemia (PML)/retinoic acid receptor alpha (RARalpha), have clinical remissions through leukemic cell differentiation after all-trans-retinoic acid (RA) treatment. This differentiation therapy propelled interest in uncovering molecular mechanisms for RA-dependent APL differentiation. We previously identified the ubiquitin-activating enzyme-E1-like protein (UBE1L) as an RA-regulated target gene in APL that triggers PML/RARalpha degradation and apoptosis. This study reports that conjugation of the ubiquitin-like species, interferon-stimulated gene, 15-kDa protein (ISG15), also occurs during RA-induced APL differentiation. Knock-down of UBE1L expression inhibited this conjugation. RA treatment of APL and other RA-responsive leukemic cells induced expression of UBE1L and ISG15 as well as intracellular ISG15 conjugates. Notably, ISG15 conjugation did not occur in RA-resistant NB4-R1 APL cells. Induction of UBE1L and ISG15 along with ISG15 conjugation in RA-sensitive NB4-S1 APL cells were detected following treatment with specific retinoids and type I interferon (IFN). UBE1L and ISG15 mRNAs were co-expressed in normal human tissues that were examined. In contrast, UBE1L mRNA expression was markedly repressed in several cancer cell lines. A physical association was found between UBE1L and ISG15 in vivo. This required the conserved diglycine motif in the carboxyl terminus of ISG15. Targeting UBE1L expression with small inhibitory RNA or small hairpin RNA inhibited IFN and RA-induced ISG15 conjugation. Formation of ISG15 conjugates through induction of an activating enzyme represents a novel pharmacologic mechanism for regulation of this ubiquitin-related species. Taken together, the observed rela tionship between expression of UBE1L and ISG15, their physical association and coordinate regulation, and induced ISG15 conjugation during leukemic cell differentiation implicate an important role for these proteins in retinoid response.