Considerable indirect evidence suggests that the type 2 deiodinase (D2) generates T₃ from T₄ for local use in specific tissues including pituitary, brown fat, and brain, whereas the type I deiodinase (D1) generates T₃ from T₄ in the thyroid and peripheral tissues primarily for export to plasma. From studies in deiodinase-deficient mice, the importance of the D2 for local T₃ generation has been confirmed. However, the phenotypes of these D1 knockout (KO) and D2KO mice are surprisingly mild and their serum T₃ level, general health, and reproductive capacity are unimpaired. To explore further the importance of 5′deiodination in thyroid hormone economy, we used a mouse devoid of both D1 and D2 activity. In general, the phenotype of the D1/D2KO mouse is the sum of the phenotypes of the D1KO and D2KO mice. It appears healthy and breeds well, and most surprisingly its serum T₃ level is normal. However, impairments in brain gene expression and possibly neurological function are somewhat greater than those seen in the D2KO mouse, and the serum rT₃ level is elevated 6-fold in the D1/D2KO mouse but only 2-fold in the D1KO mouse and not at all in the D2KO mouse. The data suggest that whereas D1 and D2 are not essential for the maintenance of the serum T₃ level, they do serve important roles in thyroid hormone homeostasis, the D2 being critical for local T₃ production and the D1 playing an important role in iodide conservation by serving as a scavenger enzyme in peripheral tissues and the thyroid.