RPE65 is a major protein of unknown function found associated with the retinyl pigment epithelial (RPE) membranes [Hamel, C. P., Tsilou, E., Pfeffer, B. A., Hooks, J. J., Detrick, B., and Redmond, T. M. (1993) J. Biol. Chem. 268, 15751-15757; Bavik, C. O., Levy, F., Hellman, U., Wernstedt, C., and Eriksson, U. (1993) J. Biol. Chem. 268, 20540-20546]. RPE65 knockouts fail to synthesize 11-cis-retinal, the chromophore of rhodopsin, and accumulate all-trans-retinyl esters in the RPE. Previous studies have also shown that RPE65 is specifically labeled with all-trans-retinyl ester based affinity labeling agents, suggesting a retinyl ester binding role for the protein. In the present work, we show that purified RPE65 binds all-trans-retinyl palmitate (tRP) with a K(D) = 20 pM. These quantitative experiments are performed by measuring the quenching of RPE65 fluorescence by added tRP. The binding for tRP is highly specific because 11-cis-retinyl palmitate binds with a K(D) = 14 nM, 11-cis-retinol binds with a K(D) = 3.8 nM, and all-trans-retinol (vitamin A) binds with a K(D) = 10.8 nM. This stereospecificity for tRP is to be compared to the binding of retinoids to BSA, where virtually no discrimination is found in the binding of the same retinoids. This work provides further evidence that RPE65 functions by binding to and mobilizing the highly hydrophobic all-trans-retinyl esters, allowing them to enter the visual cycle.