We have previously shown that retinoic acid (RA) fails to induce transglutaminase C in H-ras transformed NIH-3T3 cells. Therefore, we investigated the effect of the H-ras oncogene on the metabolism of RA and on the expression of the cellular RA-binding protein I mRNA. HPLC analysis of the media and cell extracts demonstrated that H-ras-transformed cells metabolize RA to a much lesser extent than control cells, resulting in a higher concentration of RA in H-ras cells. Although inactive in endogenous transglutaminase induction, H-ras cell-associated RA was shown to be biologically available to induce activation of a reporter construct containing a retinoid response element and in stimulating transglutaminase activity in nontransfected cells. Cellular RA-binding protein I mRNA, supposedly involved in RA storage, was significantly increased in the H-ras-transformed cells. These data demonstrate that, even though H-ras-transformed cells accumulate up to 20 fold the concentration of RA as NIH-3T3 cells, they fail to show transglutaminase induction, suggesting that H-ras interferes with signal transduction by RA.