The thyroid microsomal antibody (M-Ab) has been found to be an antibody against thyroid peroxidase (TPO), and such antibodies have been reported not only to bind TPO but also to directly inhibit TPO activity. In this study we investigated the relationship between TPO activity-inhibiting immunoglobulin (TPII) and thyroid function in 55 untreated patients with hyperthyroidism due to Graves' disease and 35 untreated patients with Hashimoto's disease. TPO partially purified from the microsomal fraction of Graves' thyroid tissue by Sephacryl S-300 gel filtration was incubated with immunoglobulin (Ig) fractions of serum prepared by precipitation with 15% polyethylene glycol. At the end of incubation, TPO activity was measured by a guaiacol assay. The TPII level was expressed as the TPII index, defined as the inhibition of TPO activity by patient Ig divided by inhibition produced by a known positive Ig. We also measured serum free T4, free T3, and TSH concentrations and anti-M-Ab titers, the latter by a microenzyme-linked immunosorbent assay. When a positive TPII index was defined as more than the mean + 2 SD of the TPII index (0.38) for 15 normal subjects, 13 patients with Graves' disease and 14 patients with Hashimoto's disease had positive TPII index values. There was a positive correlation between the TPII index values and the M-Ab titers in patients with either Graves' disease (r = 0.38; P less than 0.01) or Hashimoto's disease (r = 0.52; P less than 0.01). The mean TPII index in patients with Hashimoto's disease was significantly higher than that in patients with Graves' disease [0.38 +/- 0.42 (+/- SD) vs. 0.19 +/- 0.41; P less than 0.05]. The slope of the regression line between the TPII index values and the M-Ab titers for patients with Hashimoto's disease was steeper than that for patients with Graves' disease. The mean serum free T4 concentration was significantly lower in those patients with Hashimoto's disease who had positive TPII index values than in those with negative TPII index values (14.0 +/- 5.0 vs. 9.6 +/- 3.7 pmol/L; P less than 0.01). There was no significant difference in thyroid function between the patients with Graves' disease with positive and negative TPII index values. TPII appears to inhibit thyroid function in some patients, but no simple relationship between TPII and thyroid function in autoimmune thyroid disease was demonstrated. Understanding the factors that control access of anti-TPO antibody to its antigen may help to elucidate the significance of circulating anti-TPO antibody.