Fatty acids are substrates and inducers for cytochrome P450 2E1 (CYP2E1) and peroxisome proliferator activated receptor α (PPARα). Previously, we have shown that the ethanol-induced CYP2E1 expression in rat is accompanied by the inhibition of the expression of the PPARα gene and the reduction in polyunsaturated fatty acid content. To further analyze the effect of CYP2E1 and ethanol in PPARα-mediated fatty acid homeostasis, the expression of PPARα and retinoid x receptor α (RXRα) and their target genes was examined in ethanol fed CYP2E1 deficient mice. Our data demonstrated that the expression of PPARα and RXRα genes was activated in the livers of CYP2E1-null mice suggesting a compensatory effect for the absence of CYP2El. In addition, the expression of PPARα target genes, which included the liver fatty acid-binding protein, malic enzyme, and CYP4A1 genes, was induced indicating the activation of PPARα-mediated pathways in CYP2E1 deficient mice. Ethanol inhibited the expression of some of the PPARα target genes in wild-type mouse livers, and the inhibitory effect of ethanol was particularly prominent in the CYP2E1-null mice. Morphologically, centrilobular fat accumulation was detected in the ethanol fed CYP2E1-null mouse livers suggesting that inhibition of PPARα-mediated pathways might be responsible for the ethanol-induced fatty liver in CYP2El-null mice. In addition, the expression of CYP2E1 was not changed in the PPARα-null mice. These data suggest that CYP2E1 and ethanol can regulate PPARα-mediated fatty acid homeostasis. CYP2E1-induced lipid peroxidation might play a major role in lipid metabolism, PPARα only becomes important when the CYP2E1 level is low and polyunsaturated fatty acids increase.