In all classes of vertebrates the deiodination of the prohormone thyroxine (T₄) to 3,5,3'-triiodothyronine (T₃) represents an essential activation step in thyroid hormone action. The possible presence of iodothyronine deiodinase activity in protochordates has been demonstrated in vivo. Recent molecular cloning of the genomes and transcripts of several ascidian species allows further investigation into thyroid-related processes in ascidians. A cDNA clone from Halocynthia roretzi (hrDx) was found to have significant homology (30% amino acid identity) with the iodothyronine deiodinase gene sequences from vertebrates, including the presence of an in frame UGA codon which might encode a selenocysteine (SeC) in the active site. Since it was not certain that the 3'UTR contained a SECIS element (SeC insertion sequence element), essential for SeC incorporation, a chimeric expression vector of the hrDx coding sequence and the rat deiodinase SECIS element was produced, as well as an expression vector containing the intact hrDx cDNA. COS, CHO and HEK cells were transfected with these vectors and deiodinase activity was measured in cell homogenates. Outer ring deiodinase activity was detected using both T₄ and rT₃ as substrates, and activity was enhanced by the presence of the reductive cofactor dithiothreitol (DTT). The enzyme activity was optimal during incubation between 20 - 30 C at pH 6 - 7, and was strongly inhibited by gold-thioglucose (GTG). The Halocynthia deiodinase appears to be a high K_m enzyme (K_m rT₃ 2 µM and K_m T₄ 4 µM). Deiodinase activity was completely lost upon the substitution of the SeC residue in the putative catalytic center by either cysteine or alanine. Transfection of the full length hrDx cDNA produced deiodinase activity confirming the presence of a SECIS element in the 3'UTR as revealed by the SECISearch program. In conclusion, our results show for the first time the existence of an ascidian iodothyronine outer ring deiodinase. This raises the hypothesis that in protochordates the prohormone T₄ is activated by enzymatic outer ring deiodination to T₃.