Experiments were conducted to determine which microsomal enzymes are involved in the in vitro hepatic oxidative N-demethylation of cocaine to norcocaine, the first step in the biotransformation of cocaine to its ultimate hepatotoxic metabolite. Cocaine was found to undergo conversion to norcocaine by two alternate pathways, one involving only cytochrome P-450 and the other requiring both cytochrome P-450 and FAD-containing monooxygenase. In the first pathway, cocaine was directly N-demethylated to norcocaine by cytochrome P-450; this reaction was enhanced by phenobarbital induction and was inhibited by both n-octylamine and metyrapone. The second route was found to be a two-step reaction involving cocaine N-oxide as an intermediate. In this pathway, cocaine is first oxidized to cocaine N-oxide by FAD-containing monooxygenase, followed by a cytochrome P-450-catalyzed N-demethylation to norcocaine. This latter step was enhanced by phenobarbital treatment and inhibited by n-octylamine. Cocaine N-oxide also exhibited a Type I binding spectrum with mouse hepatic microsomes. In addition, a model system consisting of ferrous sulfate was found to catalyze the N-demethylation of cocaine N-oxide. On the basis of these experiments, it is concluded that cytochrome P-450 and FAD-containing monooxygenase participate in the initial oxidation of cocaine to norcocaine. We also propose a mechanism to account for the conversion of cocaine N-oxide to norcocaine.