Degradation of 7,8-dihydrofolate (H2folate) in the presence of dihydrofolate reductase (DHFR) is due not to an oxygenase activity of the reductase as previously reported but to dismutation of H2folate to folate and 5,6,7,8-tetrahydrofolate (H4folate). The reaction can be followed spectrophotometrically or by analysis of the reaction mixture by high-performance liquid chromatography (HPLC). The products were also isolated and characterized. O2 uptake during the reaction is much less than stoichiometric with H2folate disappearance and is attributed to autoxidiation of the H4folate formed. The dismutation activity is a property of highly purified Streptococcus faecium DHFR isoenzyme 2 (but not isoenzyme 1) and of Lactobacillus casei DHFR, but not of bovine liver DHFR. The activity is dependent on tightly bound NADP and/or NADPH. Removal of the nucleotide results in loss of dismutation activity, which is restored by adding NADP or NADPH. Maximum activity is obtained when .apprx. 1 mol equivalent of nucleotide is added per mol of DHFR. It is proposed that in the dismutation reaction bound NADP(H) is alternately reduced and oxidized by incoming molecules of H2folate with release of folate and H4folate, respectively. The relatively slow rate of folate formation presumably limits the rate of the overall reaction. The equilibrium constant for the dismutation reaction is 19.4 .+-. 7.4 at 22.degree. C and pH 7.0. Calculation of standard oxidation-reduction potentials at pH 7 gave values of -0.230 V for the H2folate/H4folate pair and -0.268 V for the folate/H2folate pair. The mechanism by which NADP is retained by the enzyme from some sources during purification procedures is unclear. With one exception, fluorescence titration gave dissociation constants in the normal range (0.08-24 .mu.M) for complexes of NADP and NADPH with the enzymes either as isolated or after removal of bound nucleotide.