Expression of vertebrate Hox genes is regulated by retinoids in cell culture and in early embryonic development. We have identified a 185-bp retinoid-responsive transcriptional enhancer 5' of the human HOXD4 gene, which regulates inducibility of the gene in embryonal carcinoma cells through a pattern of DNA-protein interaction on at least two distinct elements. One of these elements contains a direct repeat mediating ligand-dependent interaction with retinoic acid receptors, and is necessary though not sufficient for the enhancer function. The HOXD4 enhancer directs expression of a lacZ reporter gene in the neural tube of transgenic mouse embryos in a time-regulated and regionally restricted fashion, reproducing part of the anterior neuroectodermal expression pattern of the endogenous Hoxd-4 gene. Administration of retinoic acid to developing embryos causes alterations in the spatial restriction of the transgene expression domain, indicating that the HOXD4 enhancer is also a retinoid-responsive element in vivo. The timing of the retinoic acid response differs from that seen with more 3' Hox genes, in that it occurs much later. This shows that the temporal window of competence in the ability to respond to retinoic acid differs between Hox genes and can be linked to specific enhancers. Mutations in the direct repeat or in a second element in the enhancer affect both retinoid response in culture and developmental regulation in embryos, suggesting that co-operative interactions between different factors mediate the enhancer activity. These data provide further support for a role of endogenous retinoids in regulation and spatial restriction of Hox gene expression in the central nervous system