Aldo-keto reductases (AKRs) constitute a large protein superfamily of mainly NAD(P)-dependent oxidoreductases involved in carbonyl metabolism. Catalysis is promoted by a conserved tetrad of active site residues (Tyr, Lys, Asp and His). Recent results of structure-function relationship studies for xylose reductase (AKR2B5) require an update of the proposed catalytic mechanism. Electrostatic stabilization by the epsilon-NH3+ group of Lys is a key source of catalytic power of xylose reductase. A molecular-level analysis of the substrate binding pocket of xylose reductase provides a case of how a very broadly specific AKR achieves the requisite selectivity for its physiological substrate and could serve as the basis for the design of novel reductases with improved specificities for biocatalytic applications.