The hypothesis that treatment of Gunn rats with 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD) activates an alternative pathway of bilirubin disposal, involving an induced form of cytochrome P-450 [Proc. Natl. Acad. Sci. USA 75:682-685 (1978)], has been investigated by studying the mechanisms of bilirubin oxidation in chemical model systems and in liver microsomal systems in vitro. Hematin, copper sulfate, and the iron chelate of EDTA were all active in promoting degradation of bilirubin in the presence of hydrogen peroxide. Evidence was obtained for a microsomal bilirubin-degrading system that could be induced in the liver by treating either rats or chick embryos with TCDD, beta-naphthoflavone, or 3,4,3',4'-tetrachlorobiphenyl (3,4-TCB) in vivo. The activity of this system required NADPH and oxygen and was markedly stimulated by addition of 3,4-TCB (a planar polyhalogenated biphenyl) and much less markedly by the nonplanar analogue 2,4,2',4'-tetrachlorobiphenyl. These two biphenyls were also inhibitory towards the 7-ethoxyresorufin O-deethylase activity of the induced microsomes and here again the nonplanar analogue was markedly less active. Dose-response experiments for stimulation of bilirubin breakdown and inhibition of 7-ethoxyresorufin O-deethylase activity after addition of 3,4-TCB in vitro showed both effects to be caused by similar concentrations of the biphenyl. These results suggest that a polyhalogenated chemical may interact with TCDD-induced microsomes, inhibit their monooxygenase activity, and stimulate production of a bilirubin-degrading species.