The bifunctional dehydrogenase/cyclohydrolase domain of the human NADP-dependent trifunctional methyleneH4folate dehydrogenase/methenylH4folate cyclohydrolase/formylH4folate synthetase (H4folate = tetrahydrofolate) catalyzes two sequential reactions involved in the interconversion of H4folate derivatives. We have established by equilibrium dialysis that a single H4folate-binding site exists per monomer of the dimeric domain and that the presence of nucleotides has two unexpected effects on H4folate substrate binding. Nucleotides containing a 5'-phosphate cause positive cooperativity in the binding of methyleneH4folate but not of 10-formylH4folate, and NADP increases the affinity for 10-formylH4folate by a factor of 25. The results indicate that dinucleotide preferentially binds before 10-formylH4folate in the reverse cyclohydrolase reaction, and this mechanism increases the efficiency of conversion of 10-formylH4folate to methyleneH4folate. We report new kinetic data that are also consistent with a steady-state random mechanism for this enzyme. To assess whether the enzyme functions at equilibrium in vivo, we determined the overall chemical equilibrium constant of Keq = 16 for ([10- formylH4folate][NADPH])/([methyleneH4folate][NADP]). Using this value and reported ratios of free dinucleotides and folate derivatives in vivo, we estimate that the cytosolic dehydrogenase/cyclohydrolase reactions exist near the equilibrium position. However, the NAD-dependent dehydrogenase/cyclohydrolase reactions in mitochondria are far from equilibrium and are poised toward 10-formylH4folate synthesis. The results of the binding and kinetic studies indicate that the bifunctional nature of the methyleneH4folate dehydrogenase/methenylH4folate cyclohdrolase domain is designed to optimize the overall reverse reactions in vivo.