PRKAR1A (R1A)-retinoic acid receptor-alpha (R1A-RARalpha) is the sixth RARalpha-containing fusion protein in acute promyelocytic leukemia (APL). Using the murine bone-marrow retroviral transduction/transformation assay, we showed that R1A-RARalpha fusion protein could transform bone-marrow progenitor/stem cells. In gel-shift assays, R1A-RARalpha was able to bind to a panel of retinoic acid response elements both as a homodimer and as a heterodimer with RXRalpha, and demonstrated distinct DNA-binding characteristics compared with wild-type RARalpha/RXRalpha or other X-RARalpha chimeric proteins. The ratio of R1A-RARalpha to RXRalpha proteins affected the retinoic acid response element interaction pattern of R1A-RARalpha/RXRalpha complexes. Studies comparing R1A-RARalpha with R1A-RARalpha(DeltaRIIa) demonstrated that the RIIa protein interaction domain located within R1A was responsible for R1A-RARalpha homodimeric DNA binding and interaction with wild-type R1A protein. However, the RIIa domain was not required for R1A-RARalpha-mediated transformation because its deletion in R1A-RARalpha(DeltaRIIa) did not compromise its transformation capability. In contrast, introduction of point mutations within the RARalpha portion of either R1A-RARalpha or R1A-RARalpha(DeltaRIIa), previously demonstrated to eliminate RXRalpha interaction or treatment of transduced cells with RXRalpha shRNA or a RXRalpha agonist, reduced transformation capability. Thus, leukemic transformation by APL fusion protein PRKAR1A-RARalpha is critically dependent on RXRalpha, which suggests RXRalpha is a promising target for APL.