We recently identified that the Y' bile acid binders are 3 alpha-hydroxysteroid dehydrogenases (3 alpha-HSD). In the present studies, purified 3 alpha-HSD catalyzed rapid 3H loss from [3 beta-3H, C24-14C]lithocholic and chenodeoxycholic acids without net conversion to 3-oxo bile acids under physiologic pH and redox conditions. [3 beta-3H]Cholic acid was a poor substrate. The Y' fraction of hepatic cytosol was exclusively responsible for this activity and 3H was transferred selectively to NADP+. Time-dependent 3H loss was also seen in isolated hepatocytes. Further hydroxylation products of lithocholic and chenodeoxycholic acids lost 3H at the same rate, whereas 3H loss from lithocholic acid rapidly ceased, which suggests compartmentation of this bile acid in hepatocytes. Indomethacin inhibited 3H loss from bile acids either in incubations with the pure enzyme or in isolated hepatocytes. Indomethacin did not alter the initial uptake rate of bile acids by hepatocytes, but caused a redistribution of unconjugated bile acids into the medium at early time points (2.5 and 5.0 min) and that of conjugated bile acids at later time intervals (30 min). 3H loss from the 3 beta position therefore can be used to probe the interaction between bile acids and cytosolic 3 alpha-HSD in intact cells, and indomethacin is capable of inhibiting this interaction.