Morphine dehydrogenase (MDH) of Pseudomonas putida M10 catalyses the NADP(+)-dependent oxidation of morphine and codeine to morphinone and codeinone. This enzyme forms the basis of a sensitive detection and assay method for heroin metabolites and a biotransformation process for production of hydromorphone and hydrocodone. To improve these processes we have undertaken a thorough examination of the kinetic mechanism of MDH. Sequence comparisons indicated that MDH belongs within the aldose reductase enzyme family. MDH was shown to be specific for the pro-R hydrogen of NADPH. In steady-state kinetic studies, product inhibition patterns suggested that MDH follows a Theorell-Chance mechanism for codeinone reduction at pH 7, and a non-Theorell-Chance sequential ordered mechanism for codeine oxidation at pH 9.5. Residues corresponding to the catalytically important Tyr-48, Lys-77 and Asp-43 of aldose reductase were modified by site-directed mutagenesis, resulting in substantial loss of activity consistent with a catalytic role for these residues. Loss of activity of MDH in the presence of the reaction product morphinone was found to be due to the formation of a covalent adduct with Cys-80; alteration of Cys-80 to serine resulted in an enzyme with greatly enhanced stability.