Retinoic acid (RA) protects mice from diet-induced obesity. The activity is mediated in part through activation of the nuclear receptors RA receptors (RARs) and peroxisome proliferator-activated receptor β/δ and their associated binding proteins cellular RA binding protein type II (CRABP-II) and fatty acid binding protein type 5 in adipocytes and skeletal muscle, leading to enhanced lipid oxidation and energy dissipation. It was also reported that RA inhibits differentiation of cultured preadipocytes. However, whether the hormone suppresses adipogenesis in vivo and how the activity is propagated remained unknown. In this study, we show that RA inhibits adipocyte differentiation by activating the CRABP-II/RARγ path in preadipose cells, thereby upregulating the expression of the adipogenesis inhibitors Pref-1, Sox9, and Kruppel-like factor 2 (KLF2). In turn, KLF2 induces the expression of CRABP-II and RARγ, further potentiating inhibition of adipocyte differentiation by RA. The data also indicate that RA suppresses adipogenesis in vivo and that the activity significantly contributes to the ability of the hormone to counteract diet-induced obesity.