All-trans-retinoic acid (RA) treatment induces morphological remission in acute promyelocytic leukemia (APL) patients carrying the t(15;17) and expressing the PML/RARalpha product by inducing terminal differentiation of the leukemic clone. RA treatment induces downregulation of PML/RARalpha and reorganization of the PML-nuclear bodies. These events have been proposed to be essential for the induction of APL cell differentiation by RA. Here, we show that in the APL-derived NB4 cell line as well as in myeloid precursor U937 cells expressing the PML/RARalpha (U937/PR9) and in blasts from APL patients, the PML/RARalpha fusion protein is cleaved by a caspase 3-like activity induced by RA treatment. In fact, a caspase 3-like activity is detectable in PML/RARalpha expressing cells after RA treatment, and selective caspase inhibitor peptides are able to prevent the RA-induced degradation of the fusion protein in vivo and in vitro. Using recombinant caspases and PML/RARalpha deletion mutants we mapped a caspase 3 cleavage site (Asp 522) within the alpha-helix region of the PML component of the fusion protein. The extent of PML/RARalpha cleavage directly correlates with the ability of RA to restore the normal PML nuclear bodies (NBs) pattern. However, RA-induced differentiation is not prevented by the persistence of the fusion product and occurs in the absence of normally structured PML NBs. These results indicate that PML/RARalpha is directly involved in conferring RA sensitivity of APL cells and that the RA-induced reassembly of PML NBs is the consequence of the disappearance of PML/RARalpha.