All-trans-retinoic acid (atRA), the active metabolite of vitamin A, induces gene transcription via binding to nuclear retinoic acid receptors (RARs). The primary hydroxylated metabolites formed from atRA by CYP26A1, and the subsequent metabolite 4-oxo-atRA, bind to RARs and potentially have biologic activity. Hence, CYP26A1, the main atRA hydroxylase, may function either to deplete bioactive retinoids or to form active metabolites. This study aimed to determine the role of CYP26A1 in modulating RAR activation via formation and elimination of active retinoids. After treatment of HepG2 cells with atRA, (4S)-OH-atRA, (4R)-OH-atRA, 4-oxo-atRA, and 18-OH-atRA, mRNAs of CYP26A1 and RARβ were increased 300- to 3000-fold, with 4-oxo-atRA and atRA being the most potent inducers. However, >60% of the 4-OH-atRA enantiomers were converted to 4-oxo-atRA in the first 12 hours of treatment, suggesting that the activity of the 4-OH-atRA was due to 4-oxo-atRA. In human hepatocytes, atRA, 4-OH-atRA, and 4-oxo-atRA induced CYP26A1 and 4-oxo-atRA formation was observed from 4-OH-atRA. In HepG2 cells, 4-oxo-atRA formation was observed even in the absence of CYP26A1 activity and this formation was not inhibited by ketoconazole. In human liver microsomes, 4-oxo-atRA formation was supported by NAD(+), suggesting that 4-oxo-atRA formation is mediated by a microsomal alcohol dehydrogenase. Although 4-oxo-atRA was not formed by CYP26A1, it was depleted by CYP26A1 (Km = 63 nM and intrinsic clearance = 90 μl/min per pmol). Similarly, CYP26A1 depleted 18-OH-atRA and the 4-OH-atRA enantiomers. These data support the role of CYP26A1 to clear bioactive retinoids, and suggest that the enzyme forming active 4-oxo-atRA may be important in modulating retinoid action.