Abstract Aldehyde:NAD oxidoreductase (EC 1.2.1.3), purified to homogeneity from horse liver, possesses, in addition to its dehydrogenase activity, the ability to hydrolyze p-nitrophenyl esters at a rate equal to approximately one-third that of the oxidation-reduction reaction. That this esterase activity is most probably an active site phenomenon is suggested by the competitive inhibition of nitrophenyl acetate hydrolysis by high concentrations of propionaldehyde, a substrate for the dehydrogenase reaction. The coenzyme for the dehydrogenase reaction, NAD, also exerts a modifying influence on the esterase activity, producing a 2-fold enhancement of rate of nitrophenyl ester hydrolysis. NADH exerts the same 2-fold stimulation of the esterase reaction. By comparing the concentrations of substrate and coenzyme needed to affect the esterase reaction with the calculated dissociation constants determined from initial velocity studies, it has been possible to suggest an ordered binding of substrates in the dehydrogenase reaction. The mechanism postulates that NAD binds preferentially to free enzyme to form an enzyme-NAD binary complex, followed by the binding of aldehyde to give a ternary complex. Binding of aldehyde to free enzyme occurs only at extremely high concentrations of aldehyde, and, thus, is not significant under normal assay conditions nor at physiological aldehyde concentrations. In view of the preferred order of the dehydrogenase reaction, the dependence of the Vmax of the reaction upon the choice of aldehyde substrate suggested that either the formation, interconversion, or breakdown of the ternary complex (or complexes) is most probably rate limiting. The kinetic importance of the interconversion of ternary complexes was eliminated by determining that no deuterium isotope was obtained when 1-deutero-propionaldehyde was used as a substrate. A Taft plot of the Vmax and substrate for the dehydrogenase reaction gave a positive p* value, indicating that the ratelimiting step is favored by enhancement of the partially positive nature of the carbonyl carbon. In accordance with the data and by analogy with glyceraldehyde 3-phosphate dehydrogenase, it is suggested that either the formation or the breakdown of a covalent intermediate through nucleophilic attack on the carbonyl carbon of the substrate is most probably the rate-limiting step in the dehydrogenase reaction scheme.