Retinoic acid influences epidermal morphology and function through its ability to control transcription. Because the circulation presents the epidermis with micromolar amounts of retinol that can be converted to retinoic acid, regulating retinol access is imperative. In keratinocytes the majority of retinol is sequestered as long chain fatty acid esters. Although much has been learned about the major esterifying enzyme, little is known about the hydrolase that accesses retinol from its storage depot. Murine carboxylesterases and hormone sensitive lipase have been shown to have this activity. We found that their in vitro sensitivity to bis-p-nitrophenyl phosphate (BNPP), however, was not shared by the epidermal hydrolase activity. We therefore produced and screened two keratinocyte cDNA expression libraries and identified a previously sequenced gene (GS2) as a keratinocyte retinyl ester (RE) hydrolase insensitive to BNPP. The enzyme also catalyzes fattyacyl CoA-dependent and -independent retinol esterification. The hydrolysis reaction is greater at neutral pH, whereas the esterification reaction is greater at acidic pH. These activities are consistent with the increased RE content that accompanies epidermal maturation. In addition, this enzyme utilizes triolein as substrate and generates diacylglyceride and free fatty acid.