Retinoids have shown promise as anti-cancer and cancer preventative agents. All-trans-N-(4-hydroxyphenyl)retinamide (4HPR) belongs to a new group of retinoids that not only inhibit the proliferation of cancer cells but also can induce apoptosis in certain cancer cells. Because of its increased efficacy against cancer cells and its low toxicity it has been entered into a number of clinical trials. However, its mechanism of action is not known, and it had been assumed that it is not a true retinoid. Here we analyze its ability to function as an activator of nuclear retinoid receptors (RARs and RXRs). We observe that, in transactivation assays, 4HPR is a potent transactivator with RARgamma and a moderate activator with RARbeta but is not an activator with RARalpha and RXRalpha. Furthermore, RARgamma-selective transactivation by 4HPR is enhanced on some response elements and reduced on others when compared to natural retinoids. In contrast to transactivation, 4HPR in transrepression assays functions mostly with RARalpha, RARbeta, and RXRalpha. Optimal receptor activation is seen at 4HPR concentrations at which it is a potent growth inhibitor and inducer of apoptosis. We conclude that 4HPR is a highly selective activator of retinoid receptors. We propose that this selective activation of the nuclear receptors is likely to be the basis for its specific biological activities and its favorable pharmaceutical properties.