Elucidating the origin of substrate and coenzyme specificity has been the focus of much work relating to enzyme engineering. Many enzymes exhibit tight specificity for particular substrates despite a close structural relationship to other nonreactive compounds. This tight specificity is especially remarkable and important biologically for the coenzymes NADH and NADPH. In the present study, we examined the preference of pentaerythritol tetranitrate reductase, an ‘old yellow enzyme’ family member, for the coenzymes NADPH over NADH. Using structural and mutagenesis studies, we have previously established that the coenzyme nicotinamide group is the key binding determinant in old yellow enzymes [Khan H et al. (2005)FEBS J272, 4660–4671]. We have now performed detailed transient-state studies using NAD(P)H and the nonreactive analogues 1,4,5,6-tetrahydroNAD(P)H [NAD(P)H4], leading us to uncover an additional binding step in the reductive half-reaction of pentaerythritol tetranitrate reductase. We suggest that this initial binding step may primarily reflect binding of the adenine ribophosphate portion of the coenzyme, and that the second step reflects a rearrangement of the nicotinamide. Bipartite recognition, in which the adenine ribophosphate moiety localizes the coenzyme in the active site region, enables subsequent and localized searches of configurational space by the nicotinamide moiety to form the catalytically relevant charge-transfer complex. We suggest that this localized search contributes to catalytic efficiency via the principle of ‘reduction in dimensionality’.