Ethanol induces in rat liver microsomes a form of cytochrome P-450 differing in substrate specificity from cytochrome P-450 species present in controls or in rats treated with phenobarbital or 3-methylcholanthrene. Its relative capacity to oxidize ethanol remained to be determined and was studied using highly purified cytochrome P-450 preparations and comparing their activity in a reconstituted microsomal ethanol oxidizing system (MEOS). On a molar basis, reconstituted MEOS activity was found to be highest when assayed with ethanol-inducible cytochrome P-450, intermediate with cytochrome P-450 from phenobarbital-treated rats, and lowest with cytochrome P-450 from controls or 3-methylcholanthrene-treated rats. A decrease in apparent Km for ethanol was also found to be associated with higher MEOS activity of ethanol-inducible cytochrome P-450. The induction by ethanol of a catalytically distinct form of cytochrome P-450, and the comparatively high ethanol oxidizing activity of this cytochrome P-450 species, are in accordance with the MEOS hypothesis.