The role of oxidative stress in alcoholic liver disease and cytokeratin aggresome formation is the focus of this in vitro study. HepG2 cells transduced to over express CYP2E1 (E47) and control HepG2 cells (C34) were first treated with arachidonic acid, then Fe-NAT, and finally with ethanol. In the E47 ethanol-treated cells, CYP2E1 was induced and a higher level of reactive oxygen species and carbonyl proteins were generated. The proteasome activity decreased significantly in the E47 ethanol-treated cells. This inhibition was prevented when CYP2E1 was inhibited by DAS. Microarray analysis showed gene expression down regulation of the proteasome subunit, as well as ubiquitin pathway proteins in the E47 ethanol-treated cells. 4-Hydroxynonenal (4-HNE) adducts were increased in the E47 cells treated with ethanol. Furthermore, the immunoprecipitated 4-HNE modified proteins from these cells stained positive with antibodies to the proteasome subunit alpha 6. These results indicate that the ethanol induced CYP2E1 generates oxidative stress that is responsible for the decrease in proteasome activity. Cytokeratin 8 and 18 were induced by ethanol treatment of E47 cells and polyubiquitinated forms of these proteins were found in the polyubiquitin smear upon Western blots analysis. Cytokeratin aggresomes and Mallory body-like inclusions formed in the ethanol-treated E47 cells, indicating that the ubiquitinated cytokeratins accumulated as a result of the inhibition of the proteasome by ethanol treatment when oxidation of ethanol induced oxidative stress. This is the first report where ethanol caused Mallory body-like cytokeratin inclusions in transformed human liver cells in vitro.