Homeodomain proteins are transcriptional factors that play a regulatory role in mediating pattern formation in developing embryos. The induction of homeobox (HOX) gene expression by the developmental morphogen, retinoic acid represents a relevant differe ntiation marker in these cells. The induction of homeobox mRNAs, by retinoic acid, is delayed in the PA-1 cells transformed by an activated N-ras oncogene. Five kb of upstream DNA from the mRNA start site of human Hox A4 (HOX 1.4) gene is required for ful l retinoic acid induction. Transfection of PA-1 cell variants in the presence or absence of retinoic acid treatment revealed regions containing inducible promoter activity; Ras and retinoic acid sensitive promoter activity was localized to 65 bp of seque nce, between -3155 and -3090 upstream of the start site. This region of the promoter contains one RARE and another highly conserved binding site. These studies reveal that like AP-2 activity, the transcriptional activity of the HOX A4 promoter is inhibited in these cells as compared to the activity in cells with normal AP-2 mRNA expression. Thus "transcriptional interference" can mediate oncogenic transformation and inhibition of differentiation and differentiation-specific gene ex pression.