The role of the NH(2)-terminus of cytochrome P450 2E1 (CYP2E1) in intracellular targeting was investigated. Two NH(2)-terminal CYP2E1 mutants, Delta(2-29)2E1, lacking the transmembrane domain, and N(++)2E1, having Ala2Lys and Val3Arg substitutions, were generated and expressed in the H2.35 mouse hepatoma cell line. In cells transfected with both constructs, a 40 kDa fragment of CYP2E1 (Delta2E1) was found to be localized to mitochondria as evidenced from immunofluorescence microscopy and subcellular fractionation studies. Delta2E1 was shown to be a soluble protein localized inside the mitochondria, displayed catalytic activity when reconstituted with adrenodoxin and adrenodoxin reductase, and was also present in mitochondria isolated from rat liver. It is concluded that in the absence of the hydrophobic NH(2)-terminal sequence, a putative mitochondrial import signal is exposed which targets CYP2E1 to this organelle where it is further processed.