Retinoids (vitamin A derivatives) are important for normal embryogenesis and retinoic acid, an acidic derivative of vitamin A, was recently proposed to be an endogenous morphogen. Several retinoids are also potent teratogens. Using an autoradiographic technique, we have identified tissues and cells in early mouse embryos that are able to specifically accumulate a radiolabelled synthetic derivative of retinoic acid. Strong accumulation of radioactivity was seen in several neural crest derivatives and in specific areas of the CNS. Gel filtration analyses of cytosols from embryos that received the radiolabelled retinoid in utero suggested that cellular retinoic acid-binding protein (CRABP) was involved in the accumulation mechanism. Immunohisto-chemical localization confirmed that cells accumulating retinoids also expressed CRABP. Strong CRABP immunoreactivity was found in neural crest-derived mesenchyme of the craniofacial area, in visceral arches, in dorsal root ganglia and in cells along the gut and the major vessels of the trunk region. In CNS, CRABP expression and retinoid binding was largely restricted to the hindbrain, to a single layer of cells in the roof of the midbrain and to cells in the mantle layer of the neural tube. Our data suggest that cells in the embryo expressing CRABP are target cells for exogenous retinoids as well as endogenous retinoic acid. Retinoic acid may thus play an essential role in normal development of the CNS and of tissues derived from the neural crest. We propose that the teratogenic effects of exogenous retinoids are due to an interference with mechanisms by which endogenous retinoic acid regulates differentiation and pattern formation in these tissues.