Experiments with rat liver homogenates showed that on subcellular fractionation the ability to catalyse the conversion of thyroxine into tri-iodothyronine was lost. The activity could in part be restored by addition of the cytosol to the microsomal fraction. Both components were found to be heat labile. The necessity of the presence of cytosol could be circumvented by incorporation of thiol-group-containing compounds in the medium. Optimal enzymic activity was observed in the presence of dithiothreitol and EDTA in medium of low osmolarity. By comparing the distribution of the converting enzyme over the subcellular fractions with a microsomal marker enzyme, glucose 6-phosphatase, it was demonstrated that the former is indeed of microsomal origin. Finally, it was shown that thiol groups play an essential role in the conversion of thyroxine into tri-iodothyronine.