RPE65 is the isomerohydrolase in the retinoid visual cycle essential for recycling of 11-cis retinal, the chromophore for visual pigments in both rod and cone photoreceptors. Mutations in the RPE65 gene are associated with inherited retinal dystrophies with unknown mechanisms. Here we show that two point mutations of RPE65, R91W and Y368H, identified in patients with retinal dystrophies both abolished the isomerohydrolase activity of RPE65 after a subretinal injection into the Rpe65-/- mice and in the in vitro isomerohydrolase activity assay, independent of their protein levels. Further, the R91W and Y368H mutants showed significantly decreased protein levels but unchanged mRNA levels when compared with the wild-type RPE65 (wtRPE65). Protein stability analysis showed that wtRPE65 is a fairly stable protein, with an apparent half-life longer than 10 h, when expressed in 293A cells. Under the same conditions, mutants R91W and Y368H both showed substantially decreased protein stabilities, with half-lives less than 2 and 6 h, respectively. Subcellular fractionation and Western blot analysis demonstrated that wtRPE65 predominantly exists in the membrane fraction, while both of the mutants are primarily distributed in the cytosolic fraction, suggesting that these mutations disrupt the membrane association of RPE65. However, palmitoylation assay showed that wtRPE65 and both of the mutants were palmitoylated. These results suggest that these mutations may result in critical structural alterations of RPE65 protein, disrupt its membrane association, and consequently impair its isomerohydrolase activity, leading to retinal degeneration.