Ligation of nuclear retinoic acid receptors (RARs) by retinoic acid (RA) activates transcription and promotes cell differentiation. RARs can also participate in non-genomic functions in extra-nuclear spaces. Here we identify an alternative isoform of RARα expressed in the cytoplasm of T lymphocytes. Extranuclear RARα functions in T cell receptor (TCR) proximal signaling and NOTCH/c-MYC-driven proliferation. In contrast to nuclear RARα, RA negatively affects extra-nuclear RARα function in T cells. Upon activation, TCR signaling induces expression of the cellular retinoic acid binding protein 2 (CRABP2), which transports RA from the cytoplasm to the nucleus to activate nuclear RARα and at the same time sequesters RA away from extra-nuclear RARα thereby promoting TCR-driven proliferation. These data show that T cell proliferation and differentiation are reciprocally regulated by extra-nuclear and nuclear RARα and that activation-induced CRABP2 functions as a rheostat of TCR signaling via its dual control over the non-genomic and genomic actions of cytoplasmic and nuclear RARα.