The retinal pigment epithelium (RPE) is a highly specialized CNS tissue that plays crucial roles in retinal homeostasis. Age-related morphological changes in the RPE have been associated with retinal degenerative disorders; our understanding of the underlying molecular mechanisms, however, remains incomplete. Here we report on a key role of Klotho (Kl), an aging-suppressor gene, in retinal health and RPE physiology. Kl Ϫ / Ϫ mice show RPE and photoreceptor degeneration, reduced pigment synthesis in the RPE, and impaired phagocytosis of the outer segment of the photoreceptors. Klotho protein (KL) is expressed in primary cultured human RPE, and regulates pigment synthesis by increasing the expression of MITF (microphthalmia transcription factor) and TYR (tyrosinase), two pivotal genes in melanogenesis. Importantly, KL increases phagocytosis in cultured RPE by inducing gene expression of MERTK/AXL/TYRO3. These effects of KL are mediated through cAMP-PKA-dependent phosphorylation of transcription factor CREB. In cultured human RPE, KL increases the L-3,4-dihydroxyphenylalanine synthesis and inhibits vascular endothelial growth factor (VEGF) secretion from basal membrane by inhibiting IGF-1 signaling and VEGF receptor 2 phosphorylation. KL also regulates the expression of stress-related genes in RPE, lowers the production of reactive oxygen species, and thereby, protects RPE from oxidative stress. Together, our results demonstrate a critical function for KL in mouse retinal health in vivo, and a protective role toward human RPE cells in vitro. We conclude that KL is an important regulator of RPE homeostasis, and propose that an age-dependent decline of KL expression may contribute to RPE degeneration and retinal pathology.