Endoplasmic reticulum-associated amyloid beta-peptide (Abeta)-binding protein (ERAB)/L-3-hydroxyacyl-CoA dehydrogenase type II (HADH II) is expressed at high levels in Alzheimer's disease (AD)-affected brain, binds Abeta, and contributes to Abeta-induced cytotoxicity. Purified recombinant ERAB/HADH II catalyzed the NADH-dependent reduction of S-acetoacetyl-CoA with a Km of approximately 68 microM and a Vmax of approximately 430 micromol/min/mg. The contribution of ERAB/HADH II enzymatic activity to Abeta-mediated cellular dysfunction was studied by site-directed mutagenesis in the catalytic domain (Y168G/K172G). Although COS cells cotransfected to overexpress wild-type ERAB/HADH II and variant beta-amyloid precursor protein (betaAPP(V717G)) showed DNA fragmentation, cotransfection with Y168G/K172G-altered ERAB and betaAPP(V717G) was without effect. We thus asked whether the enzyme might recognize alcohol substrates of which the aldehyde products could be cytotoxic; ERAB/HADH II catalyzed oxidation of a variety of simple alcohols (C2-C10) to their respective aldehydes in the presence of NAD+ and NAD-dependent oxidation of 17beta-estradiol. Addition of micromolar levels of synthetic Abeta(1-40) to purified ERAB/HADH II inhibited, in parallel, reduction of S-acetoacetyl-CoA (Ki approximately 1.6 microM), as well as oxidation of 17beta-estradiol (Ki approximately 3.2 microM) and (-)-2-octanol (Ki approximately 2.6 microM). Because micromolar levels of Abeta were required to inhibit ERAB/HADH II activity, whereas Abeta binding to ERAB/HADH II occurred at much lower concentrations (Km approximately 40-70 nM), the latter more closely simulating Abeta levels within cells, Abeta perturbation of ERAB/HADH II was likely to result from mechanisms other than the direct modulation of enzymatic activity. Cells cotransfected to overexpress ERAB/HADH II and betaAPP(V717G) generated malondialdehyde-protein and 4-hydroxynonenal-protein epitopes, which were detectable only at the lowest levels in cells overexpressing either ERAB/HADH II or betaAPP(V717G) alone. Generation of such toxic aldehydes was not observed in cells contransfected to overexpress Y168G/K172G-altered ERAB and betaAPP(V717G). We conclude that the generalized alcohol dehydrogenase activity of ERAB/HADH II is central to the cytotoxicity observed in an Abeta-rich environment.