Yeast alcohol dehydrogenase (YADH) with its cofactor nicotinamide adenine dinucleotide (NADI) could be stably encapsulated in liposomes composed of POPC (1-palmitoyl-2-oleoyl-sn-glycero-3- phosphocholine). The YADH- and NAD(+)-containing liposomes (YADH-NADL) were 100 nm in mean diameter. The liposomal YADH and NAD(+) concentrations were 2.3 mg/ mL and 3.9 mM, respectively. A synergistic effect of the liposomal encapsulation and the presence of NAD(+) was examined on the thermal stability of YADH at 45 and 50 degrees C. The enzyme stability of the YADH-NADL was compared to the stabilities of the liposomal YADH (YADHL) containing 3.3 mg/mL YADH without NAD(+) as well as the free YADH with and without NAD(+). Free YADH was increasingly deactivated during its incubation at 45 degrees C for 2 h with decrease of the enzyme concentration from 3.3 to 0.01 mg/mL because of the dissociation of tetrameric YADH into its subunits. At that temperature, the coexistence of free NAD(+) at 3.9 mM improved the stability of free YADH at 2.3 mg/mL through forming their thermostable complex, although the stabilization effect of NADI was lowered at 50 degrees C. The turbidity measurements for the above free YADH solution with and without NAD(+) revealed that the change in the enzyme tertiary structure was much more pronounced at 50 degrees C than at 45 degrees C even in the presence of NAD(+). This suggests that YADH was readily deactivated in free solution due to a decrease in the inherent affinity of YADH with NAD(+). On the other hand, both liposomal enzyme systems, YADH-NADL and YADHL, showed stabilities at both 45 and 50 degrees C much higher than those of the above free enzyme systems, YADH/NAD(+) and YADH. These results imply that the liposome membranes stabilized the enzyme tertiary and thus quaternary structures. Furthermore, the enzyme activity of the YADH-NADL showed a stability higher than that of the YADHL with a more remarkable effect of NAD(+) at 50 degrees C than at 45 degrees C. This was considered to be because even at 50 degrees C the stabilization effect of lipid membranes on the tertiary and quaternary structures of the liposomal YADH allowed the enzyme to form its thermostable complex with NAD(+) in liposomes.