The hydrolysis of 4-nitrophenyl acetate catalysed by cytoplasmic aldehyde dehydrogenase (EC 1.2.1.3) from sheep liver was studied by steady-state and transient kinetic techniques. NAD+ and NADH stimulated the steady-state rate of ester hydrolysis at concentrations expected on the basis of their Michaelis constants from the dehydrogenase reaction. At higher concentrations of the coenzymes, both NAD+ and NADH inhibited the reaction competitively with respect to 4-nitrophenyl acetate, with inhibition constants of 104 and 197 micron respectively. Propionaldehyde and chloral hydrate are competitive inhibitors of the esterase reaction. A burst in the production of 4-nitrophenoxide ion was observed, with a rate constant of 12 +/- 2s-1 and a burst amplitude that was 30% of that expected on the basis of the known NADH-binding site concentration. The rate-limiting step for the esterase reaction occurs after the formation of 4-nitrophenoxide ion. Arguments are presented for the existence of distinct ester- and aldehyde-binding sites.