Chemical derivatization studies have been directed at the sulfhydryl group of D-beta-hydroxybutyrate dehydrogenase, a lipid-requiring enzyme. Reaction with N-ethylmaleimide leads to progressive and parallel loss of both enzymic activity and coenzyme binding. Both functions are lost when 1 equiv of sulfhydryl is derivatized per mol of enzyme. Inactivation of the enzyme with methylmercury or with air oxidation also leads to loss of coenzyme binding. We conclude that a single "essential" sulfhydryl is required for coenzyme binding and consequently for enzymic activity. Only two "accessible" cysteine residues can be derivatized even at high levels of N-ethylmaleimide, whereas derivatization of the remaining three "inacessible" cysteines requires denaturation of the enzyme. The enzyme can apparently be labeled in the accessible, but nonessential, sulfhydryl in the presence of coenzyme which protects against inactivation by N-ethylmaleimide. Such selective covalent labeling of the nonessential sulfhydryl makes possible future biophysical studies of enzyme-phospholipid interaction of a functional enzyme using extrinsic probes.