Keratinocytes differentiating in vitro exhibit greater cytosolic capacity for retinoic acid synthesis from retinol or retinaldehyde as compared to nondifferentiated cells (Siegenthaler et al. 1990. Biochem. J. 268: 371-378), and increased expression of CRABP-II (Siegenthaler et al. 1988. Exp. Cell Res. 178: 114-126). Based on these observations, the content and disposition of [3H]retinoic acids were determined in intact, nondifferentiated and differentiating keratinocytes incubated with [3H]retinaldehyde or [3H]retinol. Differentiating keratinocytes contained higher levels of [3H] retinoic acids compared to undifferentiated cells when either [3H]retinaldehyde or [3H]retinol was the substrate. The largest increases in [3H]retinoic acids were achieved with [3H]retinaldehyde. Differentiation-associated increases in [3H]retinoic acids correlated with cellular content of retinoid alcohol substrates in incubations with retinaldehyde but not in incubations with retinol. Consistent with previous observations, CRABP-II was significantly increased in differentiating cells. Moreover, newly synthesized [3H]retinoic acids were retained within cells bound to CRABP-II. The results suggest that increasing cellular concentration of retinoic acids in in vitro differentiating keratinocytes is achieved by a combination of increased activity of the retinoic acid synthesis pathway and increased cellular content of CRABP-II.