A highly sensitive and accurate spectrophotometric method was developed for determination of guanase activity with guanine as substrate. The assay is based on the oxidative coupling of 3-methyl-2-benzothiazolinone hydrazone and N,N-diethylaniline. Xanthine formed from guanine by guanase is oxidized to uric acid and hydrogen peroxide by xanthine oxidase, and the hydrogen peroxide produced is determined by an oxidative-coupling reaction with 3-methyl-2-benzothiazolinone hydrazone and N,N-diethylaniline mediated by peroxidase. Formation of the indamine dye is greatly affected by the superoxide radical ion (O2-) and pH value. These problems can be overcome by separating the two reactions of hydrogen peroxide formation and color production and carrying out that color-producing reaction at pH 3.0. This method is very sensitive and accurate because the indamine dye has a very high molar extinction coefficient of 29,800. It can be used with various kinds of automatic analyzers such as a Hitachi, Olympus, or Technicon analyzer. Comparative studies showed that this method is more sensitive and reproducible than other methods. Furthermore, guanase activities determined by this method correlated well with those determined by the improved Ellis-Goldberg method. This method should be useful for measurement of guanase activity in banked blood for preventing transfusion hepatitis and could be valuable as a liver function test.