Retinoic acid (RA) displays potent anticarcinogenic activities that are mediated by the nuclear retinoic acid receptors (RARs). However, use of RA in oncology is limited by RA resistance acquired during carcinogenesis. Moreover, in some cancers, RA facilitates rather than inhibits growth. A clue to this paradoxical behavior was recently suggested by the findings that RA also activates PPARbeta/delta, a receptor involved in mitogenic and anti-apoptotic activities. The observations that partitioning of RA between its two receptors is regulated by two intracellular lipid-binding proteins-CRABP-II, which targets RA to RAR, and FABP5, which delivers it to PPARbeta/delta-further suggest that RA resistance may stem from the deregulation of the binding proteins, resulting in activation of PPARbeta/delta rather than RAR. Here, we show that, in the RA-resistant mouse model of breast cancer MMTV-neu, RA indeed activates the nonclassical RA receptor PPARbeta/delta. This behavior was traced to an aberrantly high intratumor FABP5/CRABP-II ratio. Decreasing this ratio in mammary tissue diverted RA from PPARbeta/delta to RAR and suppressed tumor growth. The data demonstrate the existence of a mechanism that underlies RA resistance in tumors, indicate that CRABP-II functions as a tumor suppressor, and suggest that the inhibition of FABP5 may comprise a therapeutic strategy for overcoming RA resistance in some tumors.