The gene coding for apolipoprotein AI (apoAI), a lipid binding protein involved in the transport of cholesterol and other lipids in the plasma, is expressed in mammals predominantly in the liver and the intestine. Liver-specific expression is controlled by synergistic interactions between transcription factors bound to three separate sites, sites A (-214 to -192), B (-169 to -146), and C (-134 to -119), within a powerful liver-specific enhancer located between nucleotides -222 and -110 upstream of the apoAI gene transcription start site (+1). Previous studies in our laboratory have shown that ARP-1, a member of the nuclear receptor superfamily whose ligand is unknown (orphan receptor), binds to site A and represses transcription of the apoAI gene in liver cells. In a more recent series of experiments, we found that site A is a retinoic acid (RA) response element that responds preferentially to the recently identified RA-responsive receptor RXR alpha over the previously characterized RA receptors RAR alpha and RAR beta. In this study we investigated the combined effects of ARP-1 and RXR alpha on apoAI gene expression in liver cells. Transient transfection assays showed that site A is necessary and sufficient for RXR alpha-mediated transactivation of the apoAI gene basal promoter in human hepatoma HepG2 cells in the presence of RA and that this transactivation is abolished by increasing amounts of cotransfected ARP-1. Electrophoretic mobility shift assays and subsequent Scatchard analysis of the data revealed that ARP-1 and RXR alpha bind to site A with similar affinities. These assays also revealed that ARP-1 and RXR alpha bind to site A as heterodimers with an affinity approximately 10 times greater than that of either ARP-1 or RXR alpha alone. Further transfection assays in HepG2 cells, using as a reporter a construct containing the apoAI gene basal promoter and its upstream regulatory elements (including site A) in their natural context, revealed that RXR alpha has very little effect on the levels of expression regardless of the presence or absence of RA. However, while ARP-1 alone or ARP-1 and RXR alpha together dramatically repress expression in the absence of RA, the repression by ARP-1 and RXR alpha together, but not ARP-1 alone, is almost completely alleviated in the presence of RA. These results indicate that transcriptional repression by ARP-1 sensitizes apoAI gene responsiveness to RXR alpha and RA and suggest that the magnitude of this responsiveness is regulated by the intracellular ratio of ARP-1 to RXR alpha. These observations raise the possibility that transcriptional repression is a general mechanism for switching gene transcription between alternative transcription activation pathways.