1. A micro-technique was developed to measure fatty acid oxidation in vitro and to investigate its possible derangement in alcoholic fatty liver disease. 2. Percutaneous liver biopsy specimens were obtained from nine control subjects and 28 alcoholic patients with mild to severe fatty liver. Fresh tissue (10–15 mg) was incubated at 37°C for 90 min in a sealed reaction flask containing 1.92 mmol/l [l- 14 C]palmitic acid (1–2 μCi) and 1% essentially fatty acid free albumin in Krebs-Henseleit buffer, pH 7.4. Radiolabelled CO 2 and perchloric acid-soluble ketone bodies were isolated and counted. 3. CO 2 production was markedly reduced in alcoholic patients with mild and severe fatty liver compared with controls. This depression was reversed by the addition of malate to the reaction flask but not by carnitine or coenzyme A. 4. Ketone body production was similar in controls and patients with mild and severe fatty liver. 5. After the incubation in vitro , the tissue was extracted with chloroform/methanol and the triglyceride fraction isolated by thin layer chromatography and counted for radioactivity. The rate of palmitic acid incorporation into triglyceride was higher in alcoholic patients, particularly those with severe fatty infiltration, compared with controls. 6. It is suggested that alcoholic fatty liver is accompanied by a progressive reduction in palmitic acid oxidation with the major defect occurring in the tricarboxylic acid cycle. In contrast, the rate of palmitic acid esterification into ‘triglyceride is enhanced.