It has long been known that retinoids are necessary for normal embryogenesis. To understand the role of retinoids in this process, it is important to elucidate the retinoid signalling pathway. The retinoid signal transduction pathway consists of three major components: (i) the metabolism of biologically active retinoids, (ii) nuclear receptors which bind to and are activated by retinoids, and (iii) the genes whose expression is regulated by the receptor/ligand complex. The initiation of the retinoid signal transduction pathway critically depends of the presence of biologically active retinoids. The production and degradation of these biologically active retinoids will be the main focus this brief review. In addition, we will discuss the developmental aspects of retinoid metabolism. Several retinoids including all-trans-retinoic acid, 9-cis-retinoic acid, 4-oxo-all-trans-retinoic acid, and 3,4-didehydro-all-trans-retinoic acid have been shown to be biologically active in the developing embryo [7–10,13,17,18,32,33,35]. The all-trans isomers of these biologically active retinoids bind to retinoic acid receptors (RARs) while 9-cis-retinoic acid binds to retinoid X receptors (RXRs) as well as to RARs. RARs and RXRs belong to the family of nuclear hormone receptors. These are multidomain transcription factors that bind to specific enhancer elements (retinoic acid response elements or RAREs) in a ligand dependent fashion [23,24]. Typically, RAR’s and RXR’s bind to enhancer elements as heterodimers. In the absence of ligand, a co-repressor is bound to this RXR/RAR heterodimer causing repression of transcription from the associated promoter. Upon binding of ligand, the co-repressor is released and transcription is activated through binding of a co-activator. Ultimately, co-activators and co-repressors affect the chromatin structure of the ligand-regulated gene [16,37].