Cleavage of heme b (Fe-protoporphyrin IX) at the alpha-meso carbon bridge is catalyzed by heme oxygenase isozymes, HO-1 and HO-2, to form biliverdin IX alpha. Currently, we have examined the requirement for the amino terminus and the hydrophobic carboxy terminus of rat HO-2 expressed in Escherichia coli for heme degradation activity and have assessed the importance of His 151 for this activity. His 151 is in the longest span of amino acids (24 residues) which are present, with only a single conservative substitution, in seven cloned heme oxygenases including the apparent single isozyme in chicken. We show His 151 is essential for cleavage of heme, as substitution of alanine for this residue by site-directed mutagenesis resulted in expression of an inactive protein with immunoreactivity toward antibody to rat HO-2. A cDNA construct in which nucleotides encoding the 33 N-terminal amino acid residues were deleted, when expressed, produced a protein of predicted size and immunoreactivity with antibody to HO-2 but also devoid of heme degrading activity. The presence of additional residues at this terminus, for the most part, accounts for the larger size of HO-2 compared to HO-1. Conversely, the hydrophobic region at the carboxy terminus did not appear to be essential for heme degradation. A construct in which the sequence encoding the primarily hydrophobic amino acids of the carboxy terminus was replaced by a sequence encoding predominantly hydrophilic residues expressed a protein which retained full capability to convert heme to biliverdin. Further, the construct with a hydrophilic carboxy terminus was not appreciably associated with bacterial membranes, suggesting that the carboxy terminus in the wild-type protein serves as a membrane anchor for this enzyme.