ATRA (all-trans retinoic acid), which is a major bioactive metabolite of vitamin A and a potent regulator of development and differentiation, mediates down-regulation of the human albumin gene. However, the mechanism of ATRA-mediated down-regulation is not well understood. In the present study, deletion analysis and luciferase assays demonstrate that ATRA causes a marked decrease in the activity of the albumin promoter, the region between nt −367 and −167 from the transcription start site, where C/EBP (CCAAT/enhancer-binding protein)-binding sites are tightly packed, is indispensable for ATRA-mediated down-regulation. ChIP (chromatin immunoprecipitation) assays revealed that in vivo binding of C/EBPα to the region markedly decreases upon incubation with ATRA, whereas ATRA treatment marginally increases the recruitment of C/EBPβ. We found that ATRA has the ability to differentially and directly induce expression of a truncated isoform of C/EBPβ, which is an LIP (liver-enriched transcriptional inhibitory protein) that lacks a transactivation domain, and to increase the binding activity of C/EBPβ-LIP to its response element. Overexpression of C/EBPβ-LIP negatively regulates the endogenous expression of albumin, as well as the activity of the albumin promoter induced by C/EBP transactivators such as C/EBPα and full-length C/EBPβ. In conclusion, we propose a novel model for down-regulation of the albumin gene, in which ATRA triggers an increase in the translation of C/EBPβ-LIP that antagonizes C/EBP transactivators by interacting with their binding sites in the albumin promoter.