Cathepsin D has been purified from rabbit thyroids, and its action on thyroglobulin has been examined. The enzyme was obtained in an electrophoretically homogenous form by gel filtration, followed by ion exchange chromatography and affinity chromatography with immobilized pepstatin. In some preparations, the enzyme occurred in a high molecular weight form. The ability of cathepsin D to hydrolyze [125I]thyroglobulin to fragments with a molecular weight of less than 100K was determined by polyacrylamide gel electrophoresis in sodium dodecyl sulfate. This activity showed a pH optimum of 3.5, was greater with reduced thyroglobulin as substrate than with the native protein, and was unaffected by potassium iodide (1-10 mM). Purified cathepsin D rapidly hydrolyzed thyroglobulin to a number of peptide intermediates. Those in the 20-45K molecular weight range had an iodothyronine content equal to or less than that of intact thyroglobulin, but the smallest peptides (apparent molecular weight, less than 2K) were iodothyronine enriched. No evidence was obtained for the release of free hormone by cathepsin D under the experimental conditions used. We conclude that cathepsin D plays a role in the initial breakdown of thyroglobulin in the thyroid and may have some selectivity for the iodothyronine portion of the molecule. The rapid hydrolysis of thyroglobulin that occurs in vivo, however, probably requires the concerted action of cathepsin D with other lysosomal endopeptidases and exopeptidases.