Reduction of fatty acids to alcohols in gourami roe homogenates and fractions thereof was studied. The reducing activity is associated with the microsomal fraction. Activation of the acid and NADPH as reducing cofactor are required. The optimal pH for reduction is between 6.5 and 7.5. Reduction rates were highest for palmitic acid and were about half of that for oleic and linoleic acids. In contrast to the equal reduction rates of the latter acids in vitro, the percentages of oleyl and linoleyl alcohols in wax esters are greatly different in vivo. Very small amounts of aldehyde are found during the reduction and some substrate label is incorporated into the phospholipids. The traces of triacylglycerols in roe lipids are not markedly labelled. In homogenates, newly formed as well as added substrate alcohol is efficiently incorporated into wax esters. Roe homogenate is capable also of oxidizing fatty alcohol to acid. In contrast to reduction, oxidation proceeds with either NADP+ or NAD+ as cofactor. Only a small portion of the newly formed acid is esterified.