Retinaldehyde dehydrogenases (RALDHs) convert retinal to retinoic acid, an important chordate morphogen. Retinal also occurs in some fungi, such as Fusarium and Ustilago spp., evidenced by the presence of rhodopsins and b-carotene cleaving, retinal-forming dioxygenases. Based on the assumption that retinoic acid may also be formed in fungi, we searched the Fusarium protein databases for RALDHs homologs, focusing on Fusarium verticillioides. Using crude lysates of Escherichia coli cells expressing the corresponding cDNAs, we checked the capability of best matches to convert retinal into retinoic acid in vitro. Thereby, we identified an aldehyde dehydrogenase, termed CarY, as a retinoic acid-forming enzyme, an activity that was also exerted by purified CarY. Targeted mutation of the carY gene in F. verticillioides resulted in alterations of mycelia development and conidia morphology in agar cultures, and reduced capacity to produce perithecia as a female in sexual crosses. Complementation of the mutant with a wild-type carY allele demonstrated that these alterations are caused by the lack of CarY. However, retinoic acid could not be detected by LC–MS analysis either in the wild type or the complemented carY strain in vivo, making elusive the connection between CarY enzymatic activity and retinoic acid formation in the fungus.