Fatty acids are ligands for the peroxisome proliferator-activated receptor ␣ (PPAR␣). Fatty acid levels are increased in liver during the metabolism of ethanol and might be expected to activate PPAR␣. However, ethanol inhibited PPAR␣ activation of a reporter gene in H4IIEC3 hepatoma cells expressing alcohol-metabolizing enzymes but not in CV-1 cells, which lack these enzymes. Ethanol also reduced the ability of the PPAR␣ ligand WY14,643 to activate reporter constructs in the hepatoma cells or cultured rat hepatocytes. This effect of ethanol was abolished by the alcohol dehydrogenase inhibitor 4-methylpyrazole and augmented by the aldehyde dehydrogenase inhibitor cyanamide, indicating that acetaldehyde was responsible for the action of ethanol. PPAR␣/retinoid X receptor extracted from hepatoma cells exposed to ethanol or acetaldehyde bound poorly to an oligonucleotide containing peroxisome proliferator response elements. This effect was also blocked by 4-methylpyrazole and augmented by cyanamide. Furthermore, in vitro translated PPAR␣ exposed to acetaldehyde failed to bind DNA. Thus, ethanol metabolism blocks transcriptional activation by PPAR␣, in part due to impairment of its ability to bind DNA. This effect of ethanol may promote the development of alcoholic fatty liver and other hepatic consequences of alcohol abuse.