Aldehyde dehydrogenases (ALDHs) catalyse the conversion of toxic aldehydes into non-toxic carboxylic acids. Of the 21 ALDHs in mice, it is the ALDH3 family members (ALDH3A1, ALDH3A2, ALDH3B1, ALDH3B2 and ALDH3B3) that are responsible for the removal of lipid-derived aldehydes. However, ALDH3B2 and ALDH3B3 have yet to be characterized. In the present study, we examined the enzyme activity, tissue distribution and subcellular localization of ALDH3B2 and ALDH3B3. Both were found to exhibit broad substrate preferences from medium- to long-chain aldehydes, resembling ALDH3A2 and ALDH3B1. Although ALDH3B2 and ALDH3B3 share extremely high sequence similarity, their localizations differ, with ALDH3B2 found in lipid droplets and ALDH3B3 localized to the plasma membrane. Both were modified by prenylation at their C-termini; this modification greatly influenced their membrane localization and enzymatic activity towards hexadecanal. We found that their C-terminal regions, particularly the two tryptophan residues (Trp462 and Trp469) of ALDH3B2 and the two arginine residues (Arg462 and Arg463) of ALDH3B3, were important for the determination of their specific localization. Abnormal quantity and perhaps quality of lipid droplets are implicated in several metabolic diseases. We speculate that ALDH3B2 acts to remove lipid-derived aldehydes in lipid droplets generated via oxidative stress as a quality control mechanism.