Acute promyelocytic leukemia (APL) is characterized by a specific t(15;17) translocation that fuses the retinoic acid receptor alpha (RAR alpha) to a novel gene product, PML. The involvement of RAR alpha is particularly intriguing in view of the efficient therapeutic effect of retinoic acid (RA) in this disease. In this report, we show that PML is specifically localized within a discrete subnuclear compartment corresponding to nuclear bodies recognized by patient autoimmune sera. In APL cells, the PML-RAR alpha hybrid displays an abnormal localization and directs RXR and other nuclear antigens into aberrant structures that are tightly bound to chromatin. This suggests that the hybrid could exert a dominant negative effect by diverting a subset of proteins from their natural sites of action. Interestingly, treatment of APL cells with RA induces a complete relocalization of each of these proteins. We propose that the beneficial role of RA in promoting myeloid differentiation in APL might be related to its ability to restore a normal subnuclear organization.