The retinaldehyde dehydrogenase 3 (Raldh3) gene encodes a major retinoic acid synthesizing enzyme and is highly expressed in the inner ear during embryogenesis. We found that mice deficient in Raldh3 bear severe impairment in vestibular functions. These mutant mice exhibited spontaneous circling/tilted behaviors and performed poorly in several vestibular-motor function tests. In addition, video-oculography revealed a complete loss of the maculo-ocular reflex and a significant reduction in the horizontal angular vestibulo-ocular reflex, indicating that detection of both linear acceleration and angular rotation were compromised in the mutants. Consistent with these behavioral and functional deficiencies, morphological anomalies, characterized by a smaller vestibular organ with thinner semicircular canals and a significant reduction in the number of otoconia in the saccule and the utricle, were consistently observed in the Raldh3 mutants. The loss of otoconia in the mutants may be attributed, at least in part, to significantly reduced expression of Otop1, which encodes a protein known to be involved in calcium regulation in the otolithic organs. Our data thus reveal a previously unrecognized role of Raldh3 in structural and functional development of the vestibular end organs.