Administration of insulin to normal fed male rats resulted in a significantly increased rate of ethanol oxidation by liver slices as compared to the control animals. The rate of ethanol oxidation by liver slices from alloxan diabetic and anti‐insulin serum treated rats was significantly lower than normal. Administration of ethanol to normal, insulin treated and alloxan diabetic animals caused a similar relative increase in the NADH/NAD ratio as measured by 4 different extra‐ and intramitochondrial redox pairs. After ethanol administration to alloxan diabetic rats, the hepatic redox state was very much reduced. Intravenous injection of ethanol (1.5 g/kg body wt.) after 30 min resulted in significantly increased concentration of plasma free fatty acids. The ethanol induced increase in plasma free fatty acid level, like that of alloxan diabetic and anti‐insulin serum treated animals was significantly lowered following insulin injection. The total activities of hepatic alcohol dehydrogenase and aldehyde dehydrogenase were significantly decreased, after alloxan treatment. The enzyme activities in the insulin treated group were of the same magnitude as in control animals. Partially purified rat liver alcohol dehydrogenase and aldehyde dehydrogenase were inhibited by free fatty acids. Laurate had a stronger inhibitory effect than palmitate and oleate. The inhibition of alcohol dehydrogenase was competitive with respect to alcohol and not with respect to NAD. The inhibition of aldehyde dehydrogenase was competitive with respect to aldehyde and not NAD. Addition of laurate (0.8 mM) to liver slices caused a significant decrease in the ethanol oxidation rate. Copyright © 1969, Wiley Blackwell. All rights reserved