The mechanism of vesication from sulfur mustard remains unknown in spite of 80 years of investigation. We recently reported sulfur mustard–related inhibition of one or more protein (serine/threonine) phosphatases in tissue cytosol in vitro, suggesting a mechanism common to other vesicants such as cantharidin and Lewisite. Our investigation showed that this inhibition was related to the concentration of 2,2′‐thiobis‐ethanol (thiodiglycol), the hydrolysis product of sulfur mustard, rather than to the concentration of mustard itself. Related work showed an increase in the rate of NAD (but not NADP) reduction upon the addition of thiodiglycol to mouse liver cytosol. This result provided evidence that metabolism beyond thiodiglycol may be contributing to protein phosphatase inhibition. This observation indicated that metabolism involving one or more dehydrogenases may be necessary to produce the ultimate inhibitor of the protein phosphatases. We report here that thiodiglycol is a substrate for horse liver alcohol dehydrogenase (Km = 3.68 ± 0.45 mM and Vmax = 0.22 ± 0.01 μmol min−1 mg protein−1) and for pyridine nucleotide‐linked enzymes in mouse liver and human skin cytosol. The alcohol dehydrogenase‐specific inhibitor 4‐methylpyrazole inhibited the oxidation of thiodiglycol by the pure horse liver enzyme as well as by the enzymes in human skin and mouse liver cytosol, indicating that the activity in the tissue preparations is also alcohol dehydrogenase. © 1998 John Wiley & Sons, Inc. J Biochem Mol Toxicol 12: 361–369, 1998