Background: Ethanol (EtOH) is a teratogen that causes severe birth defects, but the mechanisms by which EtOH affects stem cell differentiation are unclear. Our goal here is to examine the effects of EtOH and its metabolites, acetaldehyde (AcH) and acetate, on embryonic stem cell (ESC) differentiation.Methods: We designed ESC lines in which aldehyde dehydrogenase (ALDH2, NCBI#11669) and acyl-CoA synthetase short-chain family member 2 (ACSS2, NCBI#60525) were knocked out by CRISPR-Cas9 technology. We selected these genes because of their key roles in EtOH oxidation in order to dissect the effects of EtOH metabolism on differentiation.Results: By using kinetic assays, we confirmed that AcH is primarily oxidized by ALDH2 rather than ALDH1A2. We found increases in mRNAs of differentiation-associated genes (Hoxa1, Cyp26a1, and RARb2) upon EtOH treatment of WT and Acss2 À/À ESCs, but not Aldh2 À/À ESCs. The absence of ALDH2 reduced mRNAs of some pluripotency factors (Nanog, Sox2, and Klf4). Treatment of WT ESCs with AcH or 4-hydroxynonenal (4-HNE), another substrate of ALDH2, increased differentiation-associated transcripts compared to levels in untreated cells. mRNAs of genes involved in retinoic acid (RA) synthesis (Stra6 and Rdh10) were also increased by EtOH, AcH, and 4-HNE treatment. Retinoic acid receptor-c (RARc) is required for both EtOH-and AcH-mediated increases in Hoxa1 and Stra6, demonstrating the critical role of RA:RARc signaling in AcH-induced ESC differentiation.Conclusions: ACSS2 knockouts showed no changes in differentiation phenotype, while pluripotency-related transcripts were decreased in ALDH2 knockout ESCs. We demonstrate that AcH increases differentiation-associated mRNAs in ESCs via RARc.