Protein folding and aggregation inevitably compete with one another. This competition is even keener for proteins with frustrated landscapes, such as those rich in β structure. It is interesting that, despite their rugged energy landscapes and high β sheet content, intracellular lipid-binding proteins (iLBPs) appear to successfully avoid aggregation, as they are not implicated in aggregation diseases. In this study, we used a canonical iLBP, cellular retinoic acid-binding protein 1 (CRABP1), to understand better how folding is favored over aggregation. Analysis of folding kinetics of point mutants reveals that the folding pathway of CRABP1 involves early barrel closure. This folding mechanism protects sequences in CRABP1 that comprise cores of aggregates as identified by nuclear magnetic resonance. The amino acid conservation pattern in other iLBPs suggests that early barrel closure may be a general strategy for successful folding and minimization of aggregation. We suggest that folding mechanisms in general may incorporate steps that disfavor aggregation.