Carbonyl reductase activity for a novel hypnotic, N³-phenacyluridine, was mainly localized in the cytosol fraction of rabbit liver. The enzyme (N³-phenacyluridine reductase) which catalyzes the reduction of N³-phenacyluridine to N³-α-hydroxy-β-phenethyluridine was surified from the cytosolic fraction of rabbit liver by various chromatographic techniques (DEAE-Sephacel, Red Sepharose CL-6B and hydroxylapatite). N³-Phenacyluridine reductase had a minimum molecular weight of 39 kDa on sodium dodecyl sulfate polyacrylamide gel electrophoresis. This enzyme required reduced nicotinamide adenine dinucleotide phosphate (NADPH) as a cofactor and its optimal pH was 7.5. Flavonoids (quercetin and quercitrin) were potent inhibitors of the enzyme, but pyrazole or harbital had little effect. The apparent K_m and V_max values of the enzyme for the reduction of N³-phenacyluridine were 0.32 mM and 8.7 units/mg protein, respectively. A variety of carbonyl compounds, including N³-phenacyluridine, were effectively reduced by the enzyme. However, the enzyme purified from rabbit liver differs in several respects from known carbonyl reductases in rabbit liver.