The accessory factor 1 (AF1) element is an upstream transcriptional control region that plays a role in the response of the phosphoenolpyruvate carboxykinase (PEPCK) gene to both glucocorticoids and retinoic acid. We demonstrate here that retinoic acid receptor alpha (RARalpha) binds to a sequence within the AF1 element, TGACCT (site B), that is a consensus retinoic acid response element (RARE) half-site. A similar DNA sequence, TGGCCG (site C), located 1 bp downstream of site B, is not involved in the binding of RARalpha monomers or dimers but is required for the constitution of a functional RARE. Site C is also required for the formation of a complex involving RARalpha and a liver nuclear factor designated CR, for coregulator. Mutational analysis of the AF1 element shows that the RARalpha/CR complex is the trans-acting.unit that mediates the retinoic acid response of the PEPCK gene. Another member of the retinoid receptor family, retinoid X receptor alpha (RXRalpha), can also form a complex with RARalpha and the AF1 element. Several observations, including the observation that RXRalpha antibody interacts with CR, indicate that RXRalpha and CR are identical or closely related proteins. Though RXRalpha forms a complex with RARalpha and the AF1 element, we demonstrate that the AF1 element is functionally distinguishable from a retinoid X response element. Taken together, our results show that the AF1 element contains an RARE that mediates a retinoic acid response by binding an RARalpha/coregulator complex; this coregulator is presumably RXRalpha.