Cytochrome P450 46A1 (CYP46A1) is the cholesterol 24-hydroxylase initiating the major pathways of cholesterol removal from the brain, and bicalutamide (BIC) is a drug of choice for the treatment of progressive androgen-dependent prostate cancer. We evaluated the interactions of BIC with CYP46A1 by x-ray crystallography and by conducting solution and mutagenesis studies. Because BIC is administered to patients as a racemic mixture of the S and R isomers, we studied all three, racemic BIC as well as the S and R isomers. Co-crystallization of CYP46A1 with racemic BIC led to structure determinations at 2.1 Å resolution with the drug complexes exhibiting novel properties. Both BIC isomers bind to the CYP46A1 active site in very similar single orientation and adopt an energetically unfavorable folded conformation. This folded BIC conformation is correlated with drug-induced localized shifts of amino acid side chains in CYP46A1 and unusual interactions in the CYP46A1-BIC complex. One of these interactions involves a water molecule that is coordinated to the P450 heme iron and also hydrogen-bonded to the BIC nitrile. Due to polarization of the water in this environment, the heme elicits previously unreported types of P450 spectral responses. We also observed that access to the P450 active site was affected by differential recognition of S versus R isomers at the CYP46A1 surface arising from BIC conformational polymorphism.