Algal heme oxygenase is a soluble enzyme from Cyanidium caldarium that catalyzes the first committed step of phycobilin biosynthesis by converting protoheme to biliverdin IX alpha. Although the physiological substrate (protoheme) of algal heme oxygenase is identical to that of microsomal heme oxygenase, which catalyzes heme catabolism in animals, the two enzyme systems differ in several respects including the nature of the required reductants and solubility of the enzymes. Addition of the strong Fe3+ ion chelators, desferrioxamine and Tiron (4,5-dihydroxy-1,3-benzenedisulfonic acid), greatly increased the yield of solvent-extracted bilin product. The effect of the Fe3+ chelators was approximately equal whether they were added during or after the enzyme incubation. Postincubation treatment of the enzyme reaction mixture with strong acid also greatly increased the product yield. Addition of desferrioxamine to the reaction mixture after the incubation was terminated caused the appearance of an absorption spectrum, indicating an increase in the concentration of free bilin product. Acid and Fe3+ chelators are known to cause dissociation of Fe(III)-bilin complexes. These results indicate that the in vitro enzymic reaction product of algal heme oxygenase is a nonenzyme-bound Fe(III)-biliverdin IX alpha complex that is poorly extracted and/or quantitated unless it is first dissociated. Algal heme oxygenase required the simultaneous presence of both reduced ferredoxin and a second reductant such as ascorbate for activity. The requirement for L-ascorbate could be substituted by Trolox (6-hydroxy-2,5,7,8-tetramethylchroman-2-carboxylic acid) or D-ascorbate, but not by dehydroascorbate or dithiothreitol. Heme oxygenase was purified over 200-fold from C. caldarium by differential (NH4)2SO4 precipitation and serial column chromatography over reactive blue 2-Sepharose, DEAE-cellulose, Sephadex G-75, and ferredoxin-Sepharose.