Retinoic acid (RA) is an important signalling molecule in vertebrate pattern formation both in developing and regenerating tissues. The effects of RA are due largely to regulation of gene transcription, mediated by retinoic acid receptors (RAR-alpha, RAR-beta, RAR-gamma) and retinoid X receptors (RXR-alpha, RXR-beta, RXR-gamma). We have been using zebrafish as a model of regeneration to study the role of retinoic acid and its receptors in vertebrate pattern formation. In this report, we describe the molecular cloning and characterization of one of the zebrafish RARs that is the predominant receptor in the regenerating caudal fin and corresponds most closely to the RAR-gamma subtype isolated from mouse and human and to RAR-delta from newt. Zebrafish RAR-gamma (zfRAR-gamma) exhibits both structural and functional conservation with its mammalian counterparts. Studies utilizing both normal and regenerating caudal fins of the zebrafish have indicated that it is the RAR-gamma subtype, compared to RAR-alpha or RAR-beta, which is expressed at the highest levels in the tail fin. To localize the expression pattern of RAR-gamma during fin regeneration, we have carried out whole-mount in situ hybridization. ZfRAR-gamma transcripts, during fin regeneration, are localized in the blastemal tissue formed at the distal ends of the bony rays following amputation. Treatment of fish with RA during fin regeneration induces a number of striking morphological effects on the regenerate. When amputations are performed distal to the branch points or dichotomies, where a single ray bifurcates to extend two individual 'daughter' rays, RA treatment causes a dichotomy reduction where the two 'daughter' rays fuse to once again form a single ray. The single ray subsequently bifurcates in a comparatively normal manner. Our data suggest that exogenous RA can respecify pattern in the regenerating caudal fin and identifies the blastemae as possible RA target tissues.