Type 2 diabetes (T2D) is often accompanied with an induction of retinaldehyde dehydrogenase 1 (RALDH1 or ALDH1A1) expression and a consequent decrease in hepatic retinaldehyde (Rald) levels. However, the role of hepatic Rald deficiency in T2D progression remains unclear. In this study, we demonstrated that reversing T2D-mediated hepatic Rald deficiency by Rald or citral treatments, or liver-specific Raldh1 silencing substantially lowered fasting glycemia levels, inhibited hepatic glucogenesis, and downregulated phosphoenolpyruvate carboxykinase 1 (PCK1) and glucose-6-phosphatase (G6PC) expression in diabetic db/db mice. Fasting glycemia and Pck1/G6pc mRNA expression levels were strongly negatively correlated with hepatic Rald levels, indicating the involvement of hepatic Rald depletion in T2D deterioration. A similar result that liver-specific Raldh1 silencing improved glucose metabolism was also observed in high-fat diet-fed mice. In primary human hepatocytes and oleic acid-treated HepG2 cells, Rald or Rald + RALDH1 silencing resulted in decreased glucose production and downregulated PCK1/G6PC mRNA and protein expression. Mechanistically, Rald downregulated direct repeat 1-mediated PCK1 and G6PC expression by antagonizing retinoid X receptor α, as confirmed by luciferase reporter assays and molecular docking. These results highlight the link between hepatic Rald deficiency, glucose dyshomeostasis, and the progression of T2D, whilst also suggesting RALDH1 as a potential therapeutic target for T2D.