We reported previously that the induced differentiation of the myelomonocytic cell line U937 by vitamin D3 is facilitated by the transcriptional induction of the p21(WAF1/CIP1) gene by the vitamin D3 receptor (Liu, M., Lee, M.-H., Cohen, M., and Freedman, L. P. (1996) Genes Dev. 10, 143-153). Retinoic acid (RA), a physiological metabolite of vitamin A, is also a potent inducer of differentiation of several cell types, including myeloid leukemic cells. Like vitamin D3, RA acts through a subfamily of nuclear hormone receptors, RARs and RXRs (retinoid X receptors), which regulate the expression of target genes by binding to specific DNA elements and modulating transcription initiation. In this report we demonstrate that the gene encoding p21 is also a RA-responsive target gene, and we describe a functional RA response element in this gene's promoter which is required to confer RA induction through RAR.RXR heterodimers. These results correlate the RA induction of monocytic differentiation of U937 cells with the transcriptional activation of the p21 gene and suggest a role for this cyclin/cyclin-dependent kinase complex inhibitor in facilitating this differentiation pathway.