Photon capture by a rhodopsin pigment molecule induces 11-cis to all-trans isomerization of its retinaldehyde chromophore. To restore light sensitivity, the all-trans-retinaldehyde must be chemically re-isomerized by an enzyme pathway called the visual cycle. Rpe65, an abundant protein in retinal pigment epithelial (RPE) cells and a homolog of beta-carotene dioxygenase, appears to play a role in this pathway. Rpe65-/- knockout mice massively accumulate all-trans-retinyl esters but lack 11-cis-retinoids and rhodopsin visual pigment in their retinas. Mutations in the human RPE65 gene cause a severe recessive blinding disease called Leber's congenital amaurosis. The function of Rpe65, however, is unknown. Here we show that Rpe65 specifically binds all-trans-retinyl palmitate but not 11-cis-retinyl palmitate by a spectral-shift assay, by co-elution during gel filtration, and by co-immunoprecipitation. Using a novel fluorescent resonance energy transfer (FRET) binding assay in liposomes, we demonstrate that Rpe65 extracts all-trans-retinyl esters from phospholipid membranes. Assays of isomerase activity reveal that Rpe65 strongly stimulates the enzymatic conversion of all-trans-retinyl palmitate to 11-cis-retinol in microsomes from bovine RPE cells. Moreover, we show that addition of Rpe65 to membranes from rpe65-/- mice, which possess no detectable isomerase activity, restores isomerase activity to wild-type levels. Rpe65 by itself, however, has no intrinsic isomerase activity. These observations suggest that Rpe65 presents retinyl esters as substrate to the isomerase for synthesis of visual chromophore. This proposed function explains the phenotype in mice and humans lacking Rpe65.