Sepiapterin reductase catalyses the last steps in the biosynthesis of tetrahydrobiopterin, the essential co-factor of aromatic amino acid hydroxylases and nitric oxide synthases. We have determined the crystal structure of mouse sepiapterin reductase by multiple isomorphous replacement at a resolution of 1.25 A in its ternary complex with oxaloacetate and NADP. The homodimeric structure reveals a single-domain alpha/beta-fold with a central four-helix bundle connecting two seven-stranded parallel beta-sheets, each sandwiched between two arrays of three helices. Ternary complexes with the substrate sepiapterin or the product tetrahydrobiopterin were studied. Each subunit contains a specific aspartate anchor (Asp258) for pterin-substrates, which positions the substrate side chain C1'-carbonyl group near Tyr171 OH and NADP C4'N. The catalytic mechanism of SR appears to consist of a NADPH-dependent proton transfer from Tyr171 to the substrate C1' and C2' carbonyl functions accompanied by stereospecific side chain isomerization. Complex structures with the inhibitor N-acetyl serotonin show the indoleamine bound such that both reductase and isomerase activity for pterins is inhibited, but reaction with a variety of carbonyl compounds is possible. The complex structure with N-acetyl serotonin suggests the possibility for a highly specific feedback regulatory mechanism between the formation of indoleamines and pteridines in vivo.