Two short chain dehydrogenase/reductases mediate naphthol reduction reactions in fungal melanin biosynthesis. An X-ray structure of 1,3,6,8-tetrahydroxynaphthalene reductase (4HNR) complexed with NADPH and pyroquilon was determined for examining substrate and inhibitor specificities that differ from those of 1,3,8-trihydroxynaphthalene reductase (3HNR). The 1.5 A resolution structure allows for comparisons with the 1.7 A resolution structure of 3HNR complexed with the same ligands. The sequences of the two proteins are 46% identical, and they have the same fold. The 30-fold lower affinity of the 4HNR-NADPH complex for pyroquilon (a commercial fungicide that targets 3HNR) in comparison to that of the 3HNR-NADPH complex can be explained by unfavorable interactions between the anionic carboxyl group of the C-terminal Ile282 of 4HNR and CH and CH(2) groups of the inhibitor that are countered by favorable inhibitor interactions with 3HNR. 1,3,8-Trihydroxynaphthalene (3HN) and 1,3,6,8-tetrahydroxynaphthalene (4HN) were modeled onto the cyclic structure of pyroquilon in the 4HNR-NADPH-pyroquilon complex to examine the 300-fold preference of the enzyme for 4HN over 3HN. The models suggest that the C-terminal carboxyl group of Ile282 has a favorable hydrogen bonding interaction with the C6 hydroxyl group of 4HN and an unfavorable interaction with the C6 CH group of 3HN. Models of 3HN and 4HN in the 3HNR active site suggest a favorable interaction of the sulfur atom of the C-terminal Met283 with the C6 CH group of 3HN and an unfavorable one with the C6 hydroxyl group of 4HN, accounting for the 4-fold difference in substrate specificities. Thus, the C-terminal residues of the two naphthol reductase are determinants of inhibitor and substrate specificities.