Ligands for nuclear receptors facilitate the exchange of co-repressors for coactivators, leading to chromatin modifications that favour the activation of gene transcription. Here, we show that the repressed state of an endogenous retinoic acid-regulated gene is quickly re-established after ligand removal. As expected, repression is characterized by recruitment of N-CoR/SMRT-HDAC3 (histone deacetylase 3) co-repressor complexes, leading to local histone hypoacetylation. The achievement of the repressed state involves the ordered deacetylation of lysines in H4 tails. This order is determined by the inherent substrate specificity of HDAC3, and unexpectedly predicts the binding preference of N-CoR/SMRT for submaximally acetylated H4 tails. The match between the specificity of acetyl-histone deacetylation by HDAC3 and the histone-binding preference of N-CoR/SMRT allows the co-repressor complex to stabilize and propagate repression of nuclear hormone receptor gene targets.