We have studied the expression of nine homeobox genes from Hox 1, Hox 2, Hox 3 and Hox 5 clusters in human embryonal carcinoma (EC) cell lines analyzed as both stem cells and after exposure to the differentiation-inducing agents retinoic acid (RA), hexamethylenebisacetamide (HMBA) and bromodeoxyuridine (BUdR). None of the homeobox genes was expressed in stem cells, whereas all were activated, although with different kinetics, in cultures of the pluripotent EC cell line NTERA-2, clone D1 (NT2/D1), following differentiation induced by RA. At least some homeobox genes were stably expressed in differentiated cells several weeks after removal of RA from the culture medium. However, the length of initial exposure to RA is a critical factor in achieving stable gene expression, and differs among the different sets of genes and, at least in one case, among different transcripts from the same gene. No homeobox gene expression was detected in NT2/D1 cells induced to differentiate with HMBA or BUdR. Also, no expression was detectable in xenograft tumors generated by NT2/D1 cells in nude mice, even though tumors of this type contain mostly differentiated cells. Other human EC lines tested, i.e., 833KE, 2102Ep or 1156QE, did not differentiate in response to RA and did not express homeobox genes. No expression was detectable in xenograft tumors of 833KE and 2102Ep, containing essentially EC cells. These data indicate that homeobox-gene activation specifically accompanies RA-induced differentiation of NT2/D1 cells, thereby providing an excellent model for studying the molecular basis of homeobox-gene regulation and the possible role of the homeobox in cell differentiation.