Rat kidney homogenates, in phosphate-EDTA buffer, consistently catalyzed the formation of T3 from added L-thyroxine (T4). The formation of T3 was assessed by both paper chromatography and RIA of T3. Conversion of T4 to T3 appeared to be enzymatic, showing pH and temperature optima (pH 7.0 and 37 C, respectively) and tissue and time dependence. Formation of T3 was unaffected by azide, cyanide, or catalase, nor was it dependent upon oxygen; indeed, under anaerobic conditions conversion of T4 to T3 was enhanced. Dialyzed homogenate retained full activity, and no cofactor requirement was demonstrated. A role of iron and thiol groups in the enzymatic formation of T3 from T4 was suggested by the inhibitory action of iron chelators and thiol-blocking reagents. The capacity of kidney for T3 formation was considerable and increased with increasing T4 concentrations, being approximately 2 nmol/g tissue/h at very high T4 levels. The apparent Km was estimated to be 3 x 10(-6) M. The conversion of T4 to T3 was inhibited by propylthiouracil at micromolar concentrations whereas methimazole, iodide, and lithium salts were without effect. The enzymatic activity of the homogenates was associated with its particulate components, the readily sedimenting fractions corresponding to plasma membranes and mitochondria being most active, and was absent from nuclei and cytosol.