Retinol stimulates the formation of transition vesicles in situ and in all free systems based on rat liver. The stimulation is on vesicle formation from transitional endoplasmic reticulum and not on vesicle fusion with donor membranes. Vesicle budding in the cell free system requires a nucleoside triphosphate and is sensitive to inhibition by thiol reagents. In this report we develop and test a model whereby a retinol-modulated NADH:protein disulfide reductase (NADH oxidase) with protein disulfide-thiol interchange activity is implicated in the vesicle budding mechanism. The protein has the ability to restore activity to scrambled, inactive RNase A and is stimulated or inhibited by retinol depending on the redox environment. Under reducing conditions and in the presence of a chemical reductant such as GSH, the partial reaction stimulated by retinol appears to be the oxidation of membrane disulfides. This is the first report of an enzymatic mechanism to explain specific retinol effects both in vivo and in vitro on membrane trafficking not given by retinoic acid.