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1. The microsomal enzyme from liver previously called an "etherase" is now described more accurately as an ether-O-oxidase. It has been investigated further to free it from the membranes in aqueous solution and to try to define its physiological substrate. 2. After a variety of attempts with detergents, etc., the enzyme was obtained in impure solution from precipitation with 35-45% (NH4)2SO4 solution after a short digestion at room temperature. 3. When a suitably reinforced the enzyme in solution forms citrate from added ethyl ether, as it does in membranous form. This indicates the intermediary formation of acetyl CoA. 4. The enzyme in solution is unstable, though some activity remains after standing at 0degrees C for 2-3 days. Activity is lost rapidly by deep freezing, exposure to 2M-NaCl and at a pH more acid than pH 5-0. 5. The enzyme does not appear to be a known oxidase obtainable from liver microsomes; it is not for instance part of the inducible mixed oxygenase system, nor a peroxidase or catalase. 6. Since there were some similarities in stability with enzymes dealing with protozoal plasmalogens, or with lanosterol or cholesterol, we were led to explore these substrates in detail, with negative results. But a specimen of cholesterol oxidase from the branching bacterium Nocardia gave O-oxidation with diethylether. 7. The enzyme is present in the livers of all four animals examined, namely the rat, pig, guinea-pig and pigeon, but not in kidney or brain. 8. The enzyme takes up O2 with some compounds containing O-me groups. 9. The hypothesis is advanced that this normal oxidase in liver membranes exists to deal with some substances from plant sources which might prove toxic upon entering the circulation.