Retro Galaxy is a galaxy close to the Milky Way. It's a dwarf spheroidal galaxy about ten thousand light years in diameter. It's based off of Space Invaders, due to the space background being green in this area, and enemies based on the aliens from that game being present here. It also seems like this galaxy resembles space around Earth as it was decades ago, due to Sputnik 1 passing through in the cutscene.
Points of Interest
Retro Galaxy Portal
Not far from where the Hero landed in this galaxy is the Retro Galaxy Portal. It's guarded by the Alien Mothership. It was the only way for the Hero to leave this place, and using it made him end up in the Supernova Galaxy.