To study retinoid signaling in the developing telencephalon, we transfected a retinoid reporter gene into different regions of developing telencephalon. We found that the ventral telencephalon was more competent to retinoid signaling than the dorsal telencephalon. Moreover, among all retinoic acid receptors (RARs) and retinoid X receptors (RXRs), RARbeta was strongly induced by retinoic acid in the ventral telencephalon, suggesting that RARbeta might be involved in retinoid signaling competence. The RT-PCR analysis indicated that RARbeta was selectively expressed in the developing striatum of ventral telencephalon. We then demonstrated that null mutations of RARbeta gene resulted in reduction of striatal-enriched tyrosine phosphatase (STEP) mRNA in the striatum of RARbeta-/- mutant mice. Conversely, the gain-of-function study showed that ectopic expression of RARbeta1 in the cerebral cortex enhanced STEP expression, and the effect was RARbeta-isoform specific. Our study identified RARbeta as an important molecule for transducing retinoid signals in developing ventral telencephalon.