The flavoprotein rotenone-insensitive internal NADH-ubiquinone (UQ) oxidoreductase (Ndi1) is a member of the respiratory chain in Saccharomyces cerevisiae. We reported previously that bound UQ in Ndi1 plays a key role in preventing the generation of reactive oxygen species. Here, to elucidate this mechanism, we investigated biochemical properties of Ndi1 and its mutants in which highly conserved amino acid residues (presumably involved in NADH and/or UQ binding sites) were replaced. We found that wild-type Ndi1 formed a stable charge transfer (CT) complex (around 740 nm) with NADH, but not with NADPH, under anaerobic conditions. The intensity of the CT absorption band was significantly increased by the presence of bound UQ or externally added n-decylbenzoquinone. Interestingly, however, when Ndi1 was exposed to air, the CT band transiently reached the same maximum level regardless of the presence of UQ. This suggests that Ndi1 forms a ternary complex with NADH and UQ, but the role of UQ in withdrawing an electron can be substitutable with oxygen. Proteinase K digestion analysis showed that NADH (but not NADPH) binding induces conformational changes in Ndi1. The kinetic study of wild-type and mutant Ndi1 indicated that there is no overlap between NADH and UQ binding sites. Moreover, we found that the bound UQ can reversibly dissociate from Ndi1 and is thus replaceable with other quinones in the membrane. Taken together, unlike other NAD(P)H-UQ oxidoreductases, the Ndi1 reaction proceeds through a ternary complex (not a ping-pong) mechanism. The bound UQ keeps oxygen away from the reduced flavin.