Retinoic acid, the active derivative of vitamin A (retinol), is a hormonal signaling molecule that acts in developing and adult tissues. The Cyp26a1 (cytochrome p450, 26) protein metabolizes retinoic acid into more polar hydroxylated and oxidized derivatives. Whether some of these derivatives are biologically active metabolites has been debated. Cyp26a1(-/-) mouse fetuses have lethal morphogenetic phenotypes mimicking those generated by excess retinoic acid administration, indicating that human CYP26A1 may be essential in controlling retinoic acid levels during development. This hypothesis suggests that the Cyp26a1(-/-) phenotype could be rescued under conditions in which embryonic retinoic acid levels are decreased. We show that Cyp26a1(-/-) mice are phenotypically rescued by heterozygous disruption of Aldh1a2 (also known as Raldh2), which encodes a retinaldehyde dehydrogenase responsible for the synthesis of retinoic acid during early embryonic development. Aldh1a2 haploinsufficiency prevents the appearance of spina bifida and rescues the development of posterior structures (sacral/caudal vertebrae, hindgut, urogenital tract), while partly preventing cervical vertebral transformations and hindbrain pattern alterations in Cyp26a1(-/-) mice. Thus, some of these double-mutant mice can reach adulthood. This study is the first report of a mutation acting as a dominant suppressor of a lethal morphogenetic mutation in mammals. We provide genetic evidence that ALDH1A2 and CYP26A1 activities concurrently establish local embryonic retinoic acid levels that must be finely tuned to allow posterior organ development and to prevent spina bifida.