The differential display polymerase chain reaction was employed to identify changes in mRNA expression during retinoic acid-induced differentiation in embryonal carcinoma PCC4.aza1R cells. In this study, we report on one cDNA, EC1, that was identified by this method. EC-1 encodes a 0.6-kb mRNA that is present in PCC4.aza1R cells and down-regulated by retinoic acid. Sequence analysis revealed that EC-1 exhibits a 47% identity with the early transposon RNA ETn and does not contain a long open reading frame. EC-1 mRNA expression was reduced by 50% after 24 h of treatment with 10 nM retinoic acid and was undetectable after 48 h. Down-regulation of EC-1 mRNA was observed at retinoic acid concentrations as low as 0.1 nM. EC-1 was found to be expressed in several other embryonal carcinoma cell lines as well as in embryonic stem cells but was undetectable in differentiated cell types obtained after RA treatment. Northern blot analysis using RNA from multiple mouse tissues demonstrated that the expression of EC-1 is restricted to the testis. Treatment of PCC4.aza1R cells with an RAR-selective agonist also repressed the expression of EC-1 mRNA while treatment with an RXR-selective agonist reduced EC-1 expression slightly. The RAR alpha-specific antagonist Ro 41-5253 had little effect on the down-regulation of EC-1 by retinoic acid. Our observations indicate that the repression of EC-1 is associated with the induction of differentiation in embryonal carcinoma and embryonic stem cells and involves an RAR-activated signaling pathway.