Nuclear retinoic acid receptor alpha (RARalpha) activates gene expression through dynamic interactions with coregulatory protein complexes, the assembly of which is directed by the ligand and the AF-2 domain of RARalpha. Then RARalpha and its coactivator SRC-3 are degraded by the proteasome. Recently it has emerged that the proteasome also plays a key role in RARalpha-mediated transcription. Here we show that SUG-1, one of the six ATPases of the 19 S regulatory complex of the 26 S proteasome, interacts with SRC-3, is recruited at the promoters of retinoic acid (RA) target genes, and thereby participates to their transcription. In addition, SUG-1 also mediates the proteasomal degradation of SRC-3. However, when present in excess amounts, SUG-1 blocks the activation of RARalpha target genes and the degradation of RARalpha that occurs in response to RA, via its ability to interfere with the recruitment of SRC-3 and other coregulators at the AF-2 domain of RARalpha. We propose a model in which the ratio between SUG-1 and SRC-3 is crucial for the control of RARalpha functioning. This study provides new insights into how SUG-1 has a unique role in linking the transcription and degradation processes via its ability to interact with SRC-3.