Retinoic acid receptor gamma 2 (RARγ2) is the major RAR isoform expressed throughout the caudal axial progenitor domain in vertebrates. During a microarray screen to identify RAR targets, we identified a subset of genes that pattern caudal structures or promote axial elongation and are upregulated by increased RARmediated repression. Previous studies have suggested that RAR is present in the caudal domain, but is quiescent until its activation in late stage embryos terminates axial elongation. By contrast, we show here that RARγ2 is engaged in all stages of axial elongation, not solely as a terminator of axial growth. In the absence of RA, RARγ2 represses transcriptional activity in vivo and maintains the pool of caudal progenitor cells and presomitic mesoderm. In the presence of RA, RARγ2 serves as an activator, facilitating somite differentiation. Treatment with an RARγ-selective inverse agonist (NRX205099) or overexpression of dominant-negative RARγ increases the expression of posterior Hox genes and that of marker genes for presomitic mesoderm and the chordoneural hinge. Conversely, when RAR-mediated repression is reduced by overexpressing a dominant-negative co-repressor (c-SMRT), a constitutively active RAR (VP16-RARγ2), or by treatment with an RARγ-selective agonist (NRX204647), expression of caudal genes is diminished and extension of the body axis is prematurely terminated. Hence, gene repression mediated by the unliganded RARγ2-co-repressor complex constitutes a novel mechanism to regulate and facilitate the correct expression levels and spatial restriction of key genes that maintain the caudal progenitor pool during axial elongation in Xenopus embryos.