Human 125I-labelled HDL3 is degraded by isolated rat intestinal mucosal cells. In our experimental conditions, lipoprotein degradation occurred by two different mechanisms. In one, lipoprotein was degraded within the cell, following binding and internalisation. In the other, degradation occurred in the medium, which seemed to contain protease activity released from cells during incubation. Though lipoprotein-deficient serum apparently interfered with degradation in the medium, bovine serum albumin had no such effect. The lysosomal inhibitor, chloroquine, reduced degradation by 60% without inhibiting HDL binding. Intestinal cell extracts contained at least two different proteases, with pH optima of 4.5 and 8.0, respectively. Comparing HDL and LDL degradation on a molar basis, more HDL particles were degraded by the cell-free extracts at pH 4.5. This degradation was activated by dithiothreitol and was inhibited by iodoacetic acid. From these observations we conclude that HDL3 is taken up by the rat intestinal mucosal cell through a specific binding site and subsequently degraded by a thiol-dependent protease in the lysosome.