A peripheral neuropathy characterized by a transient demyelinating/remyelinating sequence results when young rats are fed a tellurium-containing diet. The neuropathy occurs secondary to a systemic block in cholesterol synthesis. Squalene accumulation suggested the lesion was at the level of squalene expoxidase, a microsomal monooxygenase that uses NADPH cytochrome P450 reductase to receive its necessary reducing equivalents from NADPH. We have now demonstrated directly specificity for squalene epoxidase; our in vitro studies show that squalene epoxidase is inhibited 50% in the presence of 5 microM tellurite, the presumptive in vivo active metabolite. Under these conditions, the activities of other monooxygenases, aniline hydroxylase and benzo(a)pyrene hydroxylase, were inhibited less than 5%. We also present data suggesting that tellurite inhibits squalene epoxidation by interacting with highly susceptible -SH groups present on this monooxygenase. In vivo studies of specificity were based on the compensatory response to feeding of tellurium. Following tellurium intoxication, there was up-regulation of squalene epoxidase activity both in liver (11-fold) and sciatic nerve (fivefold). This induction was a specific response, as demonstrated in liver by the lack of up-regulation following exposure to the nonspecific microsomal enzyme inducer, phenobarbital. As a control, we also measured the microsomal monooxygenase activities of aniline hydroxylase and benzo(a)pyrene hydroxylase. Although they were induced following phenobarbital exposure, activities of these monooxygenases were not affected following tellurium intoxication, providing further evidence of specificity of tellurium intoxication for squalene epoxidase.