The vitamin A metabolite retinoic acid (RA) serves as a ligand for nuclear RA receptors that control differentiation of progenitor cells important for vertebrate development. Genetic studies in mouse embryos deficient for RA-generating enzymes have been invaluable for deciphering RA function. RA first begins to act during early organogenesis when RA generated in trunk mesoderm begins to function as a diffusible signal controlling progenitor cell differentiation. In neuroectoderm, RA functions as an instructive signal to stimulate neuronal differentiation of progenitor cells in the hindbrain and spinal cord. RA is not required for early neuronal differentiation of the forebrain, but at later stages RA stimulates neuronal differentiation in forebrain basal ganglia. RA also acts as a permissive signal for differentiation by repressing fibroblast growth factor (FGF) signaling in differentiated cells as they emerge from progenitor populations in the caudal progenitor zone and second heart field. In addition, RA signaling stimulates differentiation of spermatogonial germ cells and induces meiosis in male but not female gonads. A more complete understanding of the normal functions of RA signaling during development will guide efforts to use RA as a differentiation agent for therapeutic purposes.