Studies have shown that mammalian cytochromes p450 participate in the metabolism of terpenes, yet their role in the biotransformation of farnesol, an endogenous 15-carbon isoprenol, is unknown. In this report, [(14)C]-farnesol was transformed to more polar metabolites by NADPH-supplemented mammalian microsomes. In experiments with microsomes isolated from acetone-treated animals, the production of one polar metabolite was induced, suggesting catalysis by CYP2E1. The metabolite was identified as (2E, 6E, 10E)-12-hydroxyfarnesol. In studies with purified CYP2E1, 12-hydroxyfarnesol was obtained as the major product of farnesol metabolism. Among a series of available human p450 enzymes, only CYP2C19 also produced 12-hydroxyfarnesol. However, in individual human microsomes, CYP2E1 was calculated to contribute up to 62% toward total 12-hydroxyfarnesol production, suggesting CYP2E1 as the major catalyst. Mammalian cells expressing CYP2E1 demonstrated further farnesol metabolism to alpha,omega-prenyl dicarboxylic acids. Since such acids were identified in animal urine, the data suggest that CYP2E1 could be an important regulator of farnesol homeostasis in vivo. In addition, CYP2E1-dependent 12-hydroxyfarnesol formation was inhibited by pharmacological alcohol levels. Given that farnesol is a signaling molecule implicated in the regulation of tissue and cell processes, the biological activity of ethanol may be mediated in part by interaction with CYP2E1-dependent farnesol metabolism.