Human aldose reductase and aldehyde reductase are members of the aldo-keto reductase superfamily that share three domains of homology and a nonhomologous COOH-terminal region. The two enzymes catalyze the NADPH-dependent reduction of a wide variety of carbonyl compounds. To probe the function of the domains and investigate the basis for substrate specificity, we interchanged cDNA fragments encoding the NH2-terminal domains of aldose and aldehyde reductase. A chimeric enzyme (CH1, 317 residues) was constructed in which the first 71 residues of aldose reductase were replaced with first 73 residues of aldehyde reductase. Catalytic effectiveness (kcat/Km) of CH1 for the reduction of various substrates remained virtually identical to wild-type aldose reductase, changing a maximal 4-fold. Deletion of the 13-residue COOH-terminal end of aldose reductase, yielded a mutant enzyme (AR delta 303-315) with markedly decreased catalytic effectiveness for uncharged substrates ranging from 80- to more than 600-fold (average 300-fold). The KmNADPH of CH1 and AR delta 303-315 were nearly identical to that of the wild-type enzyme indicating that cofactor binding is unaffected. The truncated AR delta 303-315 displayed a NADPH/D isotope effect in kcat and an increased D(kcat/Km) value for DL-glyceraldehyde, suggesting that hydride transfer has become partially rate-limiting for the overall reaction. We conclude that the COOH-terminal domain of aldose reductase is crucial to the proper orientation of substrates in the active site.