Keratinocyte differentiation requires the sequential regulation of gene expression. We have explored the role of 1,25(OH)(2)D(3) and its receptor (VDR) in this process. VDR sequentially binds to coactivator complexes such as Vitamin D receptor interacting protein (DRIP) and steroid receptor coactivator (SRC) during differentiation. Different genes respond differently to the VDR/coactivator complexes as determined by knockdown studies. The binding of DRIP205 and SRC to VDR is ligand (i.e. 1,25(OH)(2)D(3)) dependent. LXXLL motifs in these coactivators are critical for this binding; however, the affinity for VDR of the different LXXLL motifs in these coactivators varies. Hairless is an inhibitor of 1,25(OH)(2)D(3) dependent gene transcription. A phiXXphiphi motif in hairless is crucial for hairless binding to VDR, and its binding is ligand independent. 1,25(OH)(2)D(3) displaces hairless and recruits the coactivators to VDREs. Hsp90 and p23 are chaperone proteins recruited to the DRIP/VDR complex, where they block the binding of the complex to VDREs and block 1,25(OH)(2)D(3) stimulated transcription. Thus four mechanisms explain the ability of 1,25(OH)(2)D(3) to sequentially regulate gene transcription during differentiation: changes in coregulator levels, their differential binding to VDR, differential gene responsiveness to the VDR/coregulator complexes, and chaperone proteins facilitating the cycling of VDR/coregulator complexes on and off the VDREs.