The putative vertebrate morphogen retinoic acid (RA) has been shown to induce expression of many mammalian homeobox genes in cell lines, suggesting expression of this gene family in developing vertebrate embryos may be controlled in part by RA. Using the teratocarcinoma cell line F9 as a model system, we have studied the RA-response of the murine homeobox gene Hox-1.6. RA treatment of F9 cells causes the appearance of a DNAse I hypersensitive site 3' of Hox-1.6, approximately 5 kb downstream of the Hox-1.6 promoter, and this site has been shown to reflect the presence of an RA-responsive enhancer 3' of the gene. The RA-responsiveness of the enhancer is controlled by a retinoic acid responsive element (RARE) identical to the RARE of the retinoic acid receptor (RAR) beta gene; however, other sequences also influence the activity of the enhancer, suggesting the presence of binding sites for novel proteins which regulate Hox-1.6 expression. Experiments with Hox-1.6 minigenes in which lacZ expression is controlled by the Hox-1.6 promoter and enhancer demonstrate that it is the 3' enhancer which confers RA responsiveness on the endogenous promoter, as constructs which lack the enhancer, or the RARE alone, do not respond to RA. Our results support the idea that RA is an endogenous vertebrate morphogen; identification of the RA-responsive enhancer downstream of Hox-1.6 demonstrates that RA directly controls the transcription of at least one member of a gene family that determines tissue identity in the vertebrate embryo.