All-trans-retinoic acid (at-RA) induces cell differentiation in a wide variety of cell types, including F9 embryonic teratocarcinoma cells, and can influence axial pattern formation during embryonic development. We now identify a novel retinoid synthetic pathway in differentiating F9 cells that results in the intracellular production of 4-oxoretinol (4-oxo-ROL) from retinol (vitamin A). Approximately 10-15% of the total retinol in the culture is metabolized to 4-hydroxyretinol and 4-oxo-ROL by the at-RA-treated, differentiating F9 cells over an 18-hr period, but no detectable metabolism of all-trans-retinol to at-RA or 9-cis-retinoic acid is observed in these cells. Remarkably, we show that 4-oxo-ROL can bind and activate transcription of the retinoic acid receptors whereas all-trans-retinol shows neither activity. Low doses of 4-oxo-ROL (e.g., 10(-9) or 10(-10 M) can activate the retinoic acid receptors even though, unlike at-RA, 4-oxo-ROL does not contain an acid moiety at the carbon 15 position. 4-oxo-ROL does not bind or transcriptionally activate the retinoid X receptors. Treatment of F9 cells with 4-oxo-ROL induces differentiation without conversion to the acid and 4-oxo-ROL is active in causing axial truncation when administered to Xenopus embryos at the blastula stage. Thus, 4-oxo-ROL is a natural, biologically active retinoid that is present in differentiated F9 cells. Our data suggest that 4-oxo-ROL may be a novel signaling molecule and regulator of cell differentiation.