Oxidation of ethanol via alcohol dehydrogenase (ADH) explains various metabolic effects of ethanol but does not account for the tolerance and a number of associated disorders that develop in the alcoholic. These were elucidated by the discovery of the microsomal metabolism of ethanol. The physiologic role of this system comprises gluconeogenesis from ketones, fatty acid metabolism, and detoxification of xenobiotics, including ethanol. After chronic ethanol consumption, the activity of the microsomal ethanol-oxidizing system (MEOS) increases, with an associated rise in cytochromes P-450, especially CYP2E1. This induction is associated with proliferation of the endoplasmic reticulum, both in experimental animals and in humans. The role of MEOS in vivo and its increase after chronic ethanol consumption was shown most conclusively in alcohol dehydrogenase-negative deer mice. Enhanced ethanol oxidation is associated with cross-induction of the metabolism of other drugs, resulting in drug tolerance. Furthermore, there is increased conversion of known hepatotoxic agents (such as CCl4) to toxic metabolites, which may explain the enhanced susceptibility of alcoholics to the adverse effects of industrial solvents. CYP2E1 also has a high capacity to activate some commonly used drugs, such as acetaminophen, to their toxic metabolites, and to promote carcinogenesis (e.g., from dimethylnitrosamine). Moreover, catabolism of retinol is accelerated and there also is induction of microsomal enzymes involved in lipoprotein production, resulting in hyperlipemia. Contrasting with the chronic effects of ethanol consumption, acute ethanol intake inhibits the metabolism of other drugs through competition for the at least partially shared microsomal pathway. In addition, metabolism by CYP2E1 results in a significant free radical release and acetaldehyde production which, in turn, diminish reduced glutathione (GSH) and other defense systems against oxidative stress. Acetaldehyde also forms adducts with proteins, thereby altering the functions of mitochondria and of repair enzymes. Increases of CYP2E1 and its mRNA prevail in the perivenular zone, the area of maximal liver damage. CYP1A2 and CYP3A4, two other perivenular P-450s, can also sustain the metabolism of ethanol, thereby contributing to MEOS activity and possibly liver injury. By contrast, CYP2E1 inhibitors oppose alcohol-induced liver damage, but heretofore available compounds were too toxic for clinical use. Recently, however, polyenylphosphatidylcholine (PPC), an innocuous mixture of polyunsaturated lecithins extracted from soybeans, was discovered to decrease CYP2E1 activity. PPC (and its active component dilinoleoylphosphatidylcholine) also oppose hepatic oxidative stress and fibrosis. PPC is now being tested clinically for the prevention and treatment of liver disease in the alcoholic.