Human liver dihydrodiol dehydrogenase (DD; EC 1.3.1.20) exists in isoforms (DD1, DD2 and DD4) composed of 323 amino acids. DD1 and DD2 share 98% amino acid sequence identity, but show lower identities (approx. 83%) with DD4, in which a marked difference is seen in the C-terminal ten amino acids. DD4 exhibits unique catalytic properties, such as the ability to oxidize both (R)- and (S)-alicyclic alcohols equally, high dehydrogenase activity for bile acids, potent inhibition by steroidal anti-inflammatory drugs and activation by sulphobromophthalein and clofibric acid derivatives. In this study, we have prepared chimaeric enzymes, in which we exchanged the C-terminal 39 residues between the two enzymes. Compared with DD1, CDD1-4 (DD1 with the C-terminal sequence of DD4) had increased kcat/Km values for 3alpha-hydroxy-5beta-androstanes and bile acids of 3-9-fold and decreased values for the other substrates by 5-100-fold. It also became highly sensitive to DD4 inhibitors such as phenolphthalein and hexoestrol. Another chimaeric enzyme, CDD4-1 (DD4 with the C-terminal sequence of DD1), showed the same (S)-stereospecificity for the alicyclic alcohols as DD1, had decreased kcat/Km values for bile acids with 7beta- or 12alpha-hydroxy groups by more than 120-fold and was resistant to inhibition by betamethasone. In addition, the activation effects of sulphobromophthalein and bezafibrate decreased or disappeared for CDD4-1. The recombinant DD4 with the His314-->Pro (the corresponding residue of DD1) mutation showed intermediate changes in the properties between those of wild-type DD4 and CDD4-1. The results indicate that the binding of substrates, inhibitors and activators to the enzymes is controlled by residues in their C-terminal domains; multiple residues co-ordinately act as determinants for substrate specificity and inhibitor sensitivity.