Long chain free fatty acids interfere with the inhibitory action of phenethylbiguanide and related compounds on mitochondrial respiration in vitro. This interference depends on binding of fatty acids to mitochondria and diminishes with decreasing chain length. Reversal of guanidine-derivative inhibition by fatty acids differs from that caused by dinitrophenol in that the effect of fatty acid is achieved without alteration in coupling or respiratory control. The binding of phenethylbiguanide to mitochondria is inhibited by both fatty acid and dinitrophenol. Serum albumin potentiates the inhibitory potency of guanidine derivatives, probably by removing endogenous mitochondrial free fatty acids.