Conversion of T4 to T3 was studied in normal, Graves', and neoplastic thyroid tissues obtained at surgery. Homogenates of human thyroid follicular adenoma and carcinomas were incubated with [125I]T4 and dithiothreitol (DTT) at 37 C for 60 min under N2 gas. T3 formation was assessed by measuring [125I]T3 formed, using paper chromatography. In the second series of experiments, the suspensions of the 100,000 X g pellet of normal thyroid tissues adjacent to the tumor and Graves' thyroid tissues were incubated with unlabeled T4 and DTT at 37 C for 60 min under N2 gas. T3 generated was measured by RIA. T3 generation in the thyroid tissue was dependent on incubation time, amount of the tissue used, concentration of DTT, temperature, and pH. Propylthioracil inhibited T3 formation, while methimazole had no effect. A kinetic study with the homogenate of a thyroid adenoma and 100,000 X g pellet suspensions of two normal and three Graves' thyroids gave apparent Km values of 2.7, 4.9, and 4.1 microM for T4, respectively, and Vmax values of 0.8, 3.0, and 10.9 pmol T3/mg protein.min, respectively. Conversion of T4 to T3 was observed in two of three tumor tissues studied and was markedly enhanced in Graves' thyroid tissues (mean +/- SE, 11.9 +/- 2.0 pmol/mg protein.min) compared to that of normal thyroid tissues (3.2 +/- 0.6 pmol/mg protein.min; P less than 0.01). It is concluded that T4 is enzymatically converted to T3 in normal and Graves' thyroids and differentiated thyroid neoplasms. Moreover, enhanced conversion of T4 to T3 was found in Graves' thyroid tissue.