Sterol regulatory element-binding proteins (SREBPs) enhance transcription of genes encoding all of the proteins required for the cellular synthesis and uptake of cholesterol and unsaturated fatty acids. Here, we use suppression subtractive hybridization to identify a previously unrecognized SREBP-enhanced gene in mice. The gene encodes a membrane-bound enzyme that we designate SCALD, for short-chain aldehyde reductase. We expressed SCALD in bacteria, purified it extensively, and studied its catalytic properties in detergent solution. The enzyme specifically uses NADPH to reduce a variety of short-chain aldehydes, including nonanal and 4-hydroxy-2-nonenal. The enzyme also reduces retinal-dehydes, showing equal activity for all-trans-retinal and 9-cis-retinal. Northern blot analysis indicates that SCALD is expressed most abundantly in mouse liver and testis. In the liver of mice, SCALD is suppressed by fasting and induced by refeeding, consistent with regulation by SREBPs. In testis, SCALD expression is restricted to pachytene spermatocytes, as revealed by visualization of mRNA and protein. SCALD is also expressed in four layers of the retina, including the outer segment of rods and cones, as revealed by immunohistochemistry. SCALD appears to be the mouse ortholog of the human protein that has been designated variously as prostate short-chain dehydrogenase/reductase 1, retinal reductase 1, and retinol dehydrogenase 11. In view of its ability to reduce short-chain aldehydes in addition to retinals, we propose that SCALD may be induced by SREBP in liver and other tissues to prevent toxicity from fatty aldehydes that are generated from oxidation of unsaturated fatty acids that are synthesized as a result of SREBP activity.