All-trans-retinoic acid is a metabolite of vitamin A (all-trans-retinol) that functions as an activating ligand for a family of nuclear retinoic acid receptors. The intracellular levels of retinoic acid in tissues are tightly regulated, although the mechanisms underlying the control of retinoid metabolism at the level of specific enzymes are not completely understood. In this report we present the first characterization of the retinoid substrate specificity of a novel short-chain dehydrogenase/reductase (SDR) encoded by RalR1/PSDR1, a cDNA recently isolated from the human prostate (Lin, B., White, J. T., Ferguson, C., Wang, S., Vessella, R., Bumgarner, R., True, L. D., Hood, L., and Nelson, P. S. (2001) Cancer Res. 61, 1611-1618). We demonstrate that RalR1 exhibits an oxidoreductive catalytic activity toward retinoids, but not steroids, with at least an 800-fold lower apparent K(m) values for NADP+ and NADPH versus NAD+ and NADH as cofactors. The enzyme is approximately 50-fold more efficient for the reduction of all-trans-retinal than for the oxidation of all-trans-retinol. Importantly, RalR1 reduces all-trans-retinal in the presence of a 10-fold molar excess of cellular retinol-binding protein type I, which is believed to sequester all-trans-retinal from nonspecific enzymes. As shown by immunostaining of human prostate and LNCaP cells with monoclonal anti-RalR1 antibodies, the enzyme is highly expressed in the epithelial cell layer of human prostate and localizes to the endoplasmic reticulum. The enzymatic properties and expression pattern of RalR1 in prostate epithelium suggest that it might play a role in the regulation of retinoid homeostasis in human prostate.