Further studies on the liver microsomal 6-hydroxylation of lipid-soluble 3-substituted indoles demonstrate that the responsible enzyme system possesses many features in common with the microsomal drug metabolizing enzymes. However, the hydroxylation is not inhibited by bipyridyl, and animal pretreatment with phenobarbital exerts a weak stimulatory effect on the yield of 6-hydroxy compounds. The enzyme is not highly stereospecific as the d- and l-forms of N-acetyltryptophan are hydroxylated at equal rates. 6-Fluoro and methyl groups are not displaceable by hydroxy groups. Non-enzymatic hydroxylation of indolic substrates by chemical model systems gives rise to more than one monohydroxy product; on the other hand, microsomal hydroxylation produces only the 6-isomer, indicating positional specificity. microsomal hydroxylation produces only the 6-isomer, indicating positional specificity. Comparison with aniline p-hydroxylase shows that the two systems are different. The mechanism of the reaction is discussed.