Cell-free preparations of rat sciatic nerve were found to catalyze the reduction of fatty acid to alcohol in the presence of NADPH as reducing cofactor. The reductase was membrane-bound and associated primarily with the microsomal fraction. When fatty acid was the substrate, ATP, coenzyme A (CoA), and Mg2+ were required, indicating the formation of acyl CoA prior to reduction. When acyl CoA was used as substrate, the presence of albumin was required to inhibit acyl CoA hydrolase activity. Fatty acid reductase activity was highest with palmitic and stearic acids, and somewhat lower with lauric and myristic acids. It was inhibited by sulfhydryl reagents, indicating the participation of thiol groups in the reduction. Only traces of long-chain aldehyde could be detected or trapped as semicarbazone. Fatty acid reductase activity in rat sciatic nerve was highest between the second and tenth days after birth and decreased substantially thereafter. Microsomal preparations of sciatic nerve from 10-day-old rats exhibited about four times higher fatty acid reductase activity than brain or spinal cord microsomes from the same animals. Wallerian degeneration and regeneration of adult rat sciatic nerve resulted in enhanced fatty acid reductase activity, which reached a maximum at about 12 days after crush injury.