Crystal structure and co-regulator interaction studies have led to a general mechanistic view of the initial steps of nuclear receptor (NR) action. Agonist-induced transconformation of the ligand-binding domain (holo-LBD) leads to the formation of co-activator complexes, and destabilizes the co-repressor complexes bound to the ligand-free (apo) LBD. However, the molecular basis of retinoid-X receptor (RXR) 'subordination' in heterodimers, an essential mechanism to avoid signalling pathway promiscuity, has remained elusive. RXR, in contrast to its heterodimer partner, cannot autonomously induce transcription on binding of cognate agonists. Here we show that RXR can bind ligand and recruit co-activators as a heterodimer with apo-retinoic-acid receptor (apo-RAR). However, in the usual cellular environment co-repressors do not dissociate and they prohibit co-activator access because co-regulator binding is mutually exclusive. Accordingly, RXR subordination can be overcome in heterodimers that bind co-repressor weakly or in cells with a high co-activator content. We identify two types of RAR antagonists that differentially modulate co-regulator interaction, and we demonstrate that synergy between RAR ligands and RXR agonists results from increased interaction efficiency of a single p160 with the heterodimer, requiring two intact receptor-binding surfaces on the co-activator.