The activity of the drug-metabolizing enzymes in the 10,000 g supernatant fraction from female rat liver has been measured in terms of biphenyl hydroxylation in the 2- and 4-positions. The addition of liver mitochondria from the same animals to the assay system had no adverse effect when the organelles were freshly isolated in mannitol-sucrose, a procedure which produces a structurally and functionally intact organelle. If, however, 1.15% KCl was used for the isolation of mitochondria, the previously reported inhibitory effect (Axelrod 1956a) could be confirmed. Mitochondria isolated in mannitol-sucrose were found to exert an adverse effect on biphenyl hydroxylation if they were preincubated at 37°C for 30 minutes or stored for long periods at 4°C, both treatments leading to depletion of endogenous substrate and concomitantly to a loss of semipermeability; or, if they were frozen and thawed, thus breaking the mitochondrial membranes. The hydroxylation of biphenyl in the 2- and 4- positions was affected to the same extent. Addition of increasing amounts of NADP + or NADPH to the assay system stimulated biphenyl hydroxylation, up to 60% with NADP + and 140% with NADPH. When increasing amounts of previously frozen mitochondria were added to the assay system, correspondingly enhanced inhibition of both 2- and 4-hydroxylation of biphenyl resulted. Previously-frozen mitochondria were added to assay systems containing increasing amounts of NADP + or NADPH. The mitochondrial inhibition of biphenyl hydroxylation decreased with increasing levels of pyridine nucleotides. Thus, the inhibition exerted by 4.5 mg of mitochondrial protein, in the presence of 10,000 g supernatant fraction equivalent to 200 mg of liver, could be completely overcome by a 50- or 100-fold excess of NADP + over the standard amount of NADP + usually employed in the assay system. Again the formation of 2- and 4-hydroxybiphenyl ran parallel with one another. The inhibition exerted by the addition of high levels of mitochondrial protein (15 mg or more) could not be overcome, even by 100-fold excess of NADP + or NADPH in the assay system. The experiments described here with liver from female rats suggest that hepatic drug-metabolizing enzymes can be measured accurately in tissue homogenates, provided that the mitochondria are not damaged by the medium and other conditions used for their isolation and suspension, and that sufficient NADP + is supplied for the enzyme reaction.