The formation of isocholic acid from 7 alpha, 12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid by human liver preparations was examined in vitro. Liver preparations were incubated with 7 alpha, 12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid at pH 7.4 in a phosphate buffer containing NADPH or NADH. The products formed were analyzed by gas chromatography and gas chromatography/mass spectrometry. Results showed that 7 alpha,12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid was reduced mainly to isocholic acid and to cholic acid in a smaller amount in the presence of NADPH, while it was reduced only to cholic acid in the presence of NADH. The reducing enzyme participating in the formation of isocholic acid was localized largely in the cytosol and had more specificity to the unconjugated form as substrate than to the conjugated forms. 3-Keto bile acid analogues, 3-keto-5 beta-cholanoic and 7 alpha-hydroxy-3-keto-5 beta-cholanoic acids were not reduced to the corresponding iso-bile acids by the cytosol in the same conditions used in the isocholic acid formation and the activity of the enzyme catalyzing the reduction of 7 alpha,12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid to isocholic acid was not inhibited by the addition of 3-keto-5 beta-cholanoic acid or 7 alpha-hydroxy-3-keto-5 beta-cholanoic acid to the reaction mixture. Furthermore, on column chromatography of Affi-Gel Blue, the peak of the enzyme catalyzing the reduction of 7 alpha,12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid to isocholic acid was clearly distinguished from that of the enzyme catalyzing the reduction of 3-keto-5 beta-cholanoic acid to isolithocholic acid and that of alcohol dehydrogenase. These results indicate that this enzyme catalyzing the reduction of 7 alpha,12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid to isocholic acid is different from the enzyme(s) catalyzing the reduction 3-keto-5 beta-cholanoic and 7 alpha-hydroxy-3-keto-5 beta-cholanoic acids to the corresponding iso-bile acids and from alcohol dehydrogenase, and has a stereospecific character for 7 alpha,12 alpha-dihydroxy-3-keto-5 beta-cholanoic acid.