Inverse agonists are ligands that are capable of repressing basal receptor activity in the absence of an agonist. We have designed a series of C-1-substituted acetylenic retinoids that exhibit potent antagonism of retinoic acid receptor (RAR)-mediated transactivation. Comparison of these related retinoid antagonists for their ability to repress basal RAR transcriptional activity demonstrates that the identity of the C-1 substituent differentiates these ligands into two groups RAR inverse agonists and neutral antagonists. We show that treatment of cultured human keratinocytes with a RAR inverse agonist, but not a RAR neutral antagonist, leads to the repression of the serum-induced differentiation marker MRP-8. While RAR-selective agonists also repress expression of MRP-8, cotreatment with a RAR inverse agonist and a RAR agonist results in a mutual repression of their individual inhibitory activities, indicating the distinct modes of action of these two disparate retinoids in modulating MRP-8 expression. Our data indicate that RARs, like beta2-adrenoreceptors, are sensitive to inverse agonists and that this new class of retinoids will provide insight into the molecular mechanisms of RAR function in skin and other responsive tissues.