The localization of the enzymes of ketogenesis in isolated rat liver mitochondria has been investigated. Mitochondrial subfractions were isolated after disruption of this subcellular organelle by (a) hypotonic lysis in water, which permitted the ultracentrifugal separation of the soluble and membranous compartments of the mitochondrion, or by (b) a procedure involving swelling, contraction, and ultrasonic treatment, which permitted the isolation from discontinuous sucrose gradients of subfractions rich in intermembrane space protein, outer membrane, and inner membrane-matrix particles. Two membrane subfractions were invariably present as distinct bands at the lower interface of the discontinuous gradient. The upper of these two bands was found to be a highly purified preparation of outer mitochondrial membrane. Subfractions rich in matrix and in inner membrane were isolated from inner membrane-matrix particles after hypotonic treatment. The content of the various mitochondrial compartments in all subfractions was assessed from their enzymic and electron microscopic characteristics. The ketogenic activity of each subfraction was determined by measuring its capacity to form ketone bodies from acetyl CoA. The activity of this process was markedly enhanced by dithiothreitol. These measurements of ketone body formation, together with assays of individual enzymes of the ketogenic pathway, show that thiolase, HMGCoA synthase, and HMGCoA cleavage enzyme are localized in the matrix of the inner membrane-matrix particles. The rates of ketone body formation indicate that the HMGCoA synthase is the rate-limiting enzyme of the pathway in subfractions of high matrix content. Studies with sodium chloride indicate that a large portion of the HMGCoA synthase, which remains present in membrane subfractions derived from water-treated mitochondria, is bound by ionic interaction to component(s) of the membrane.