The presence of the enzyme bilirubin oxidase, which degrades bilirubin in vitro, was demonstrated in the liver. Subcellular-fractionation experiments indicate that bilirubin oxidase is located in both the inner and outer membranes of the mitochondria. The mean rate of the reaction is 1.57 +/- 0.38 (S.D.) nmol of bilirubin degraded/min per mg of mitochondrial protein (munits/mg of protein). With respect to the overall breakdown of bilirubin, the enzyme has a Km' of 136 microM-bilirubin and a Vmax.' of 9.13 munits/mg of protein. Its activity is influenced by the ionic strength of the media and is inhibited by KCN, thiol reagents, NADH and albumin. The enzyme is aerobic, and between 1 and 1.5 mol of O2 are consumed per mol of bilirubin degraded. The products of the reaction include propentdyopents. The hepatic bilirubin oxidase activity of the jaundiced Gunn-rat liver is not significantly different from that of the Sprague-Dawley rat, and it is not induced by beta-naphthoflavone.