Considerable indirect evidence suggests that the type 2 deiodinase (D2) generates T(3) from T(4) for local use in specific tissues including pituitary, brown fat, and brain, whereas the type I deiodinase (D1) generates T(3) from T(4) in the thyroid and peripheral tissues primarily for export to plasma. From studies in deiodinase-deficient mice, the importance of the D2 for local T(3) generation has been confirmed. However, the phenotypes of these D1 knockout (KO) and D2KO mice are surprisingly mild and their serum T(3) 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 T(3) 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 rT(3) 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 T(3) level, they do serve important roles in thyroid hormone homeostasis, the D2 being critical for local T(3) production and the D1 playing an important role in iodide conservation by serving as a scavenger enzyme in peripheral tissues and the thyroid.