Diencephalic defects underlie an array of neurological diseases. Previous studies have suggested that retinoic acid (RA) signaling is involved in diencephalic development at late stages of embryonic development, but its roles and mechanisms of action during early neural development are still unclear. Here we demonstrate that mice lacking enzymatic activity of the acetyltransferase GCN5 ((Gcn5(hat/hat))), which were previously characterized with respect to their exencephalic phenotype, exhibit significant diencephalic expansion, decreased diencephalic RA signaling, and increased diencephalic WNT and SHH signaling. Using a variety of molecular biology techniques in both cultured neuroepithelial cells treated with a GCN5 inhibitor and forebrain tissue from (Gcn5(hat/hat)) embryos, we demonstrate that GCN5, RAR alpha/gamma, and the poorly characterized protein TACC1 form a complex in the nucleus that binds specific retinoic acid response elements in the absence of RA. Furthermore, RA triggers GCN5-mediated acetylation of TACC1, which results in dissociation of TACC1 from retinoic acid response elements and leads to transcriptional activation of RA target genes. Intriguingly, RA signaling defects caused by in vitro inhibition of GCN5 can be rescued through RA-dependent mechanisms that require RAR beta. Last, we demonstrate that the diencephalic expansion and transcriptional defects seen in (Gcn5(hat/hat)) mutants can be rescued with gestational RA supplementation, supporting a direct link between GCN5, TACC1, and RA signaling in the developing diencephalon. Together, our studies identify a novel, nonhistone substrate for GCN5 whose modification regulates a previously undescribed, tissue-specific mechanism of RA signaling that is required to restrict diencephalic size during early forebrain development.