The retinoic acid induced 1 (RAI1) gene maps within the Smith-Magenis syndrome (SMS) region on chromosome 17p11.2. Interstitial deletion of 17p11.2 including RAI1 or mutation of RAI1 results in SMS, while duplication of 17p11.2, including RAI1, results in the dup(17)(p11.2) syndrome. Smith-Magenis syndrome is a complex disorder characterized by a constellation of ~30 features that includes mental retardation, sleep disturbance, craniofacial defects, neurological and behavioral anomalies, and variable systemic features. Dup(17)(p11.2) syndrome is characterized by mental retardation, craniofacial defects, developmental delay, failure to thrive, and hyperactivity. We hypothesized that RAI1 is a dosage-sensitive gene with specific roles in SMS and dup(17)(p11.2) syndrome. To understand the clinical consequences of haploinsufficiency of RAI1 in humans, 60 SMS patients were evaluated by fluorescent in situ hybridization and/or sequencing of RAI1 to identify 17p11.2 deletions or intragenic mutations. Phenotypic comparison between patients with deletions and those with RAI1 mutations show that 21 of 30 SMS features are the result of haploinsufficiency of RAI1. Other features such as cardiac and renal anomalies, speech and motor delay, chronic respiratory and ear infections, hypotonia, short stature, and ear and eye anomalies are associated with 17p11.2 deletions rather than RAI1 mutations (P <0.05). Mouse models were evaluated using both qualitative and quantitative methodologies for phenotypic consequences due to altered Rai1 dosage. To this extent, BAC transgenic mice overexpressing Rai1 1.5-fold (hemizygous) or 2-fold (homozygous) and Rai1-targeted heterozygous (Rai1+/-) mice with 0.5-fold dosage were utilized. Compared to wild type littermates, Rai1 overexpressing mice have growth retardation, increased locomotor activity, gait abnormalities, and abnormal anxiety-related behavior, while Rai1+/- mice are obese and hypoactive. Analyses of homozygous BAC transgenic mice revealed a dosage-dependent exacerbation of the phenotype. Both the Rai1-overexpressors and Rai1-haploinsufficient mice showed neurological deficits. To identify target genes altered due to haploinsufficiency of RAI1, RNA-interference-based knockdown (~50%) of RAI1 was achieved in HEK293T cell lines. Genome-wide gene expression profiling showed that ~60 genes were upregulated and ~200 genes were downregulated due to RAI1 haploinsufficiency. Real-time qPCR not only confirmed the gene expression profile in HEK293 cells but also in lymphoblastoid cell lines obtained from SMS patients with 17p11.2 deletion. Further, our analysis has identified several RAI1 downstream genes, implicated in circadian activity, growth regulation, lipid biosynthesis, and neuronal regulation, which are potential candidate genes for non-deletion/non-RAI1-mutation cases of SMS and SMS-like phenotypes. These results show that Rai1 dosage has major consequences on molecular processes involved in growth, development, circadian rhythm, and neurological and behavioral functions, thus providing evidence for several dosage-thresholds for phenotypic manifestations causing dup(17p11.2) syndrome or Smith-Magenis syndrome in humans.