Quantum retrodiction involves finding the probabilities for various preparation events given a measurement event. This theory has been studied for some time but mainly as an interesting concept associated with time asymmetry in quantum mechanics. Recent interest in quantum communications and cryptography, however, has provided retrodiction with a potential practical application. For this purpose quantum retrodiction in open systems should be more relevant than in closed systems isolated from the environment. In this paper we study retrodiction in open systems and develop a general master equation for the backward time evolution of the measured state, which can be used for calculating preparation probabilities. We solve the master equation, by way of example, for the driven two-level atom coupled to the electromagnetic field.