Sterols become functional only after removal of the two methyl groups at C4 by a membrane-bound multienzyme complex including a 3beta-hydroxysteroid-dehydrogenase/C4-decarboxylase (3betaHSD/D). We recently identified Arabidopsis (Arabidopsis thaliana) 3betaHSD/D as a bifunctional short-chain dehydrogenase/reductase protein. We made use of three-dimensional homology modeling to identify key amino acids involved in 4alpha-carboxy-sterol and NAD binding and catalysis. Key amino acids were subjected to site-directed mutagenesis, and the mutated enzymes were expressed and assayed both in vivo and in vitro in an erg26 yeast strain defective in 3betaHSD/D. We show that tyrosine-159 and lysine-163, which are oriented near the 3beta-hydroxyl group of the substrate in the model, are essential for the 3betaHSD/D activity, consistent with their involvement in the initial dehydrogenation step of the reaction. The essential arginine-326 residue is predicted to form a salt bridge with the 4alpha-carboxyl group of the substrate, suggesting its involvement both in substrate binding and in the decarboxylation step. The essential aspartic acid-39 residue is in close contact with the hydroxyl groups of the adenosine-ribose ring of NAD+, in good agreement with the strong preference of 3betaHSD/D for NAD+. Data obtained with serine-133 mutants suggest close proximity between the serine-133 residue and the C4beta domain of the bound sterol. Based on these data, we propose a tentative mechanism for 3betaHSD/D activity. This study provides, to our knowledge, the first data on the three-dimensional molecular interactions of an enzyme of the postoxidosqualene cyclase sterol biosynthesis pathway with its substrate. The implications of our findings for studying the roles of C4-alkylated sterol precursors in plant development are discussed.