We report a detailed computational and experimental study of the interaction of single-walled carbon nanotubes (SWCNTs) with the drug-metabolizing cytochrome P450 enzyme, CYP3A4. Dose-dependent inhibition of CYP3A4-mediated conversion of the model compound, testosterone, to its major metabolite, 6β-hydroxy testosterone was noted. Evidence for a direct interaction between SWCNTs and CYP3A4 was also provided. The inhibition of enzyme activity was alleviated when SWCNTs were pre-coated with bovine serum albumin. Furthermore, covalent functionalization of SWCNTs with polyethylene glycol (PEG) chains mitigated the inhibition of CYP3A4 enzymatic activity. Molecular dynamics simulations suggested that inhibition of the catalytic activity of CYP3A4 is mainly due to blocking of the exit channel for substrates/products through a complex binding mechanism. This work suggests that SWCNTs could interfere with metabolism of drugs and other xenobiotics and provides a molecular mechanism for this toxicity. Our study also suggests means to reduce this toxicity, eg., by surface modification.