We investigated mechanisms responsible for the control of cell growth and differentiation, and utilized retinoic acid (RA) to study these mechanisms: 1. We found a relationship between RA- induced growth inhibition and RA metabolism. Stable expression of the truncated retinoic acid receptor RAR 403 rendered sensitive cells resistant to RA for growth inhibition and metabolism, at the same time as it blunted the induction of the target gene transglutaminase II. The data suggest that RA receptors mediate its growth inhibitory action as well as its metabolism and transglutaminase II induction. 2. Dioxin and other cancer causing agents greatly reduce retinoid liver levels in mammalian organisms. Further, carcinogen exposure and/or vitamin A deficiency induce formation of abnormal cells (squamous metaplasia) in tissues lining the exposed body surfaces, which represent the first barrier to environmental carcinogens and the site of carcinoma in lung, intestine, breast, prostate, bladder etc. Since retinoids inhibit carcinogen- induced squamous metaplasia, we formed the concept that retinoids are used up in the effort of the organism to rid itself of carcinogenic substances and/or the deranged cells they induce. In fact, dietary retinoids effectively prevent mouse skin carcinogenesis. Therefore, we reasoned that animals missing the gene that codes for the principal carrier and mediator of carcinogen action, the aryl hydrocarbon receptor (Ahr), may accumulate liver retinoid stores. Remarkably, a three- fold increase in retinyl palmitate, retinoic acid and retinol was found in mice lacking the gene for the carcinogen receptor aryl hydrocarbon receptor (Ahr-null mice). Liver cells from the Ahr-null mice were also much less efficient than cells from control mice in RA metabolism. The observed large increase in retinoid concentration and in the expression of transglutaminase type II might well be responsible for the observed liver fibrosis of Ahr-null mouse. Our findings suggest a molecular connection between carcinogen-activated Ahr-dependent processes and retinoid homeostasis.