It has been postulated that the beneficial effects of the antithyroid drug propylthiouracil in the treatment of alcoholic liver disease depend primarily on the action of propylthiouracil in suppressing the increase in hepatic oxygen consumption induced by ethanol. The evidence for this effect of propylthiouracil is derived from studies in which liver oxygen consumption has been determined in in vitro preparations. In our study the effects of ethanol and propylthiouracil on liver oxygen consumption were assessed in vivo in an unrestrained and unanesthetized rat model, where liver blood flow and hepatic vein and portal vein oxygen content can be measured. Data show that the liver oxygen consumption increased in rats treated with ethanol‐containing liquid diets for 4 to 6 wk, both on withdrawal of alcohol (30%, p < 0.01), and after readministration of ethanol (50%, p < 0.01). Single‐dose ethanol administration increased portal tributary blood flow without affecting hepatic arterial blood flow in both controls and rats withdrawn from long‐term ethanol treatment. Long‐term ethanol administration per se had no effect on portal tributary blood flow; however, hepatic arterial blood flow was increased by 38% (p < 0.01). Treatment with propylthiouracil for 5 days resulted in complete suppression of the increase in liver oxygen consumption induced by long‐term ethanol administration. Propyithiouracil treatment also attenuated the increase in portal tributary blood flow after the administration of a single dose of ethanol. These determinations were made 24 hr after the last dose of propylthiouracil. In conclusion, use of a new in vivo model with unrestrained and unanesthetized rats has confirmed that long‐term administration of ethanol increases liver oxygen consumption. For the first time, it has been shown in vivo that propylthiouracil abolishes the ethanol‐induced increase in liver oxygen consumption that follows long‐term ethanol administration. (HEPATOLOGY 1993;18:415–421).