Tropinone reductase-II (TR-II) catalyzes the NADPH-dependent reduction of the carbonyl group of tropinone to a beta-hydroxyl group. The crystal structure of TR-II complexed with NADP+ and pseudotropine (psi-tropine) has been determined at 1.9 A resolution. A seven-residue peptide near the active site, disordered in the unliganded structure, is fixed in the ternary complex by participation of the cofactor and substrate binding. The psi-tropine molecule is bound in an orientation which satisfies the product configuration and the stereochemical arrangement toward the cofactor. The substrate binding site displays a complementarity to the bound substrate (psi-tropine) in its correct orientation. In addition, electrostatic interactions between the substrate and Glu156 seem to specify the binding position and orientation of the substrate. A comparison between the active sites in TR-II and TR-I shows that they provide different van der Waals surfaces and electrostatic features. These differences likely contribute to the correct binding mode of the substrates, which are in opposite orientations in TR-II and TR-I, and to different reaction stereospecificities. The active site structure in the TR-II ternary complex also suggests that the arrangement of the substrate, cofactor, and catalytic residues is stereoelectronically favorable for the reaction.