The effect of all-trans retinoic acid (atRA) on palatal fusion and the underlying mechanisms were investigated using organ culture. Compared with control group, the atRA-treated group (1 μM and 5 μM) had more medial edge epithelium (ME) remaining within the midline epithelial seam (MES). At 10 μM atRA, the opposing shelves were not in contact at the culture end (72 h). Cell death detection by TUNEL and laminin immunohistochemistry demonstrated that atRA (5 μM) induced apoptosis in mesenchyme and inhibited degradation of basal lamina within MES. Notably, migration and apoptosis of ME cells and degradation of basal lamina within MES markedly represented vehicle control palatal shelves in culture. Additionally, apoptosis was not detected in mesenchyme of control palatal shelves. Immunoblotting analysis revealed that Smad2 and Smad3 were endogenously activated and expression of Smad7 was inhibited during the fusion process. In contrast, atRA treatment abrogated phosphorylation of Smad2 and Smad3 and inducible expression of Smad7 in ME. From these data, it is assumed that inhibition of Smad pathway by atRA in ME may play a critical role in abrogation of the ME cell apoptosis and degradation of the basal laminin, which might contribute to failure of palatal fusion.