The 3-unsubstituted isoxazole ring in the anti-inflammatory drug leflunomide undergoes a unique N-O bond cleavage to the active alpha-cyanoenol metabolite A771726, which resides in the same oxidation state as the parent. In vitro studies were conducted to characterize drug-metabolizing enzyme(s) responsible for ring opening and to gain insight into the mechanism of ring opening. Under physiological conditions, leflunomide was converted to A771726 in rat and human plasma (rat plasma,t1/2 = 36 min; human plasma, t1/2 = 12 min) and whole blood (rat blood, t1/2 = 59 min; human blood, t1/2 = 43 min). Human serum albumin also catalyzed A771726 formation, albeit at a much slower rate (t1/2 = 110 min). Rat and human liver microsomes also demonstrated NADPH-dependent A771726 formation (human liver microsomes, Vmax = 1797 pmol/min/mg and Km = 274 microM). Leflunomide metabolism in microsomes was sensitive to furafylline treatment, suggesting p4501A2 involvement. 3-Methylleflunomide, which contained a 3-methyl substituent on the isoxazole ring, was resistant to ring opening in base, plasma, blood, and liver microsomes. In microsomes, two monohydroxylated metabolites were formed, and metabolite identification studies established the 3- and the 5-methyl groups on the isoxazole ring as sites of hydroxylation. These results indicate that the C3-H in leflunomide is essential for ring opening. Although A771726 formation in human liver microsomes or recombinant p4501A2 required NADPH, its formation was greatly reduced by oxygen or carbon monoxide, suggesting that the isoxazole ring opening was catalyzed by the p450Fe(II) form of the enzyme. A mechanism for the p450-mediated ring scission is proposed in which the isoxazole ring nitrogen or oxygen coordinates to the reduced form of the heme followed by charge transfer from p450Fe(II) to the C=N bond or deprotonation of the C3-H, which results in a cleavage of the N-O bond.