The first topical retinoid, all-trans-retinoic acid (ATRA), was approved by the Food and Drug Administration in 1971 for the treatment of acne. The pathways of intracellular molecular mechanism of action have been well investigated for ATRA but may not be valid for all topical retinoid compounds. The physiologic and pharmacologic effects of retinoids are mainly mediated by two distinct families of nuclear retinoid receptors: retinoic acid receptors and retinoid X receptors (RXRs). Retinoid receptors regulate transcription of a large number of genes which mainly play a role in differentiation. Externally-applied retinoids are metabolized in human epidermis. RXRs can also form heterodimers with non-retinoid nuclear receptors including vitamin D, thyroid hormone, and proliferator-activated receptors. By changing the expression of keratins, growth factors, and transglutaminases, topical retinoids exert a wide variety of effects on epithelial differentiation and proliferation and the skin immune system.