Incubation of 5-iodo-5,6-dihydrouracil (IH2Ura) with soluble rat liver enzymes at 37 degrees, pH 8.2, results in the rapid release of iodide ion. The second product resulting from the carbon skeleton of the dihydropyrimidine ring system is 2-amino-2-oxazoline-5-carboxylic acid (I). Ultraviolet absorbance measurements at 225 nm, where both IH2Ura and iodide ion absorb, indicate that IH2Ura dehalogenation is a two-step process. The first step, which is enzyme-dependent, involves dihydropyrimidine amidohydrolase (EC 3.5.2.2.)-catalyzed hydrolysis of the IH2Ura ring system presumably to yield 2-iodo-3-ureidopropionate. The enzyme preparations also catalyze the hydrolysis of 5-bromo-5,6-dihydrouracil, 5,6-dihydrouracil, and 5,6-dihydrothymine, the latter two of which are the natural substrates for dihydropyrimidine amidohydrolase. The second step in IH2Ura dehalogenation involves the nonenzymatically catalyzed, pH-independent intramolecular cyclization of 2-iodo-3-ureidopropionate via nucleophilic attack of the ureido oxygen atom on carbon-2 resulting in iodide ion and the oxazoline (I) as final products. The results are discussed relative to the role of pyrimidine catabolizing enzymes in 5-halopyrimidine dehalogenation.