Induction of the retinoic acid receptor β2 (RARβ2) gene by retinoic acid (RA) is mediated by a RA response element (RARE), which represents a high affinity binding site for RAR/RXR heterodimers acting at this site as RA-inducible transcription activators. In RA resistant RAC65 cells, RARβ2 induction is blocked due to expression of a truncated RARα acting as a dominant negative repressor. Here we show that exogenous expression of RAR but not RXR can restore RA-dependent RARβ2 promoter activation in RAC65 cells. Structure-function analysis of hRARβ2 mutants in RAC65 cells shows, that the transactivation function required to restore RARβ2 promoter activation is dependent on the DNA binding, dimerization and RA-dependent transactivation properties of hRARβ2, which are retained in a mutant (βΔ409) lacking the F domain. By contrast, dominant repression of RA-dependent mRARβ2 promoter activation by hRARβ2 mutants is independent of the DNA binding of RA-dependent transactivation function but requires a region (residues 204-384) in hRARβ2 involved in heterodimerization with RXR. These data extend previous observations on structure-function of RARs and provides tools for studying the role of retinoids and RARs during vertebrate development.