Activated hepatic stellate cells (HSCs) play a key role in liver fibrosis, and inactivating HSCs has been considered a promising therapeutic approach. We previously showed that albumin and its derivative designed for stellate cell-targeting, retinol-binding protein–albumin domain III fusion protein (referred to as R-III), inactivate cultured HSCs. Here, we investigated the mechanism of action of albumin/R-III in HSCs and examined the anti-fibrotic potential of R-III in vivo. R-III treatment and albumin expression downregulated retinoic acid (RA) signaling which was involved in HSC activation. RA receptor agonist and retinaldehyde dehydrogenase overexpression abolished the anti-fibrotic effect of R-III and albumin, respectively. R-III uptake into cultured HSCs was significantly decreased by siRNA-STRA6, and injected R-III was localized predominantly in HSCs in liver. Importantly, R-III administration reduced CCl4- and bile duct ligation-induced liver fibrosis. R-III also exhibited a preventive effect against CCl4-inducd liver fibrosis. These findings suggest that the anti-fibrotic effect of albumin/R-III is, at least in part, mediated by downregulation of RA signaling and that R-III is a good candidate as a novel anti-fibrotic drug.