Retinoic acid (RA) is required for the differentiation and morphogenesis of chordate-specific features, such as the antero-posterior regionalization of the dorsal hollow nerve cord and neural crest cells. RA receptors (RARs) have been reported exclusively in chordates, suggesting that the acquisition of the RAR gene was important for chordate evolution. A scenario is presented here for the establishment of an RAR-mediated developmental regulatory system during the course of chordate evolution. In the common chordate ancestor, RAR came to control the spatial expression pattern of Hox genes in the ectoderm and endoderm along the antero-posterior axis. In these germ layers, RA was required for the differentiation of epidermal sensory neurons and the morphogenesis of pharyngeal gill slits, respectively. As the diffuse epidermal nerve net in the chordate ancestor became centralized to form the dorsal nerve cord, the epidermal Hox expression pattern was carried into the central nervous system. Because the Hox code here came to specify neuronal identity along the antero-posterior axis, RA became inextricably linked to the antero-posterior patterning of the chordate central nervous system.