The promyelocytic leukemia (PML) tumor suppressor of acute promyelocytic leukemia (APL) regulates major apoptotic and growth-suppressive pathways. In APL, PML is involved in a chromosomal translocation generating the PML-retinoic acid receptor-{alpha} (RAR{alpha}) fusion protein. Two missense mutations in the remaining PML alleles have been identified, which give rise to a truncated cytoplasmic PML protein (Mut PML). APL patients carrying these mutations display resistance to retinoic acid (RA) and very poor prognosis. Here we show that Mut PML associates with the cytoplasmic regions we refer to as PML-cytoplasmic bodies (PML-CBs). Mut PML interacts with PML-RAR{alpha} in PML-CB and potentiates PML-RAR{alpha}-mediated inhibition of RA-dependent transcription. Remarkably, Mut PML stabilizes PML-RAR{alpha} and inhibits differentiation induced by pharmacological doses of RA. A mutant form of PML-RAR{alpha} that accumulates in the cytoplasm inhibits RA-dependent transcription and differentiation, thus suggesting that cytoplasmic localization of PML-RAR{alpha} may contribute to transformation. Finally, we show that the bcr3 PML-RAR{alpha} form is predominantly cytoplasmic and accumulates in PML-CBs. Taken together, these findings reveal novel insights into the molecular mechanisms contributing to APL.