Peroxisomes function in -oxidation of very long and long-chain fatty acids, dicarboxylic fatty acids, bile acid intermediates, prostaglandins, leukotrienes, thromboxanes, pristanic acid, and xenobiotic carboxylic acids. These lipids are mainly chain-shortened for excretion as the carboxylic acids or transported to mitochondria for further metabolism. Several of these carboxylic acids are slowly oxidized and may therefore sequester coenzyme A (CoASH). To prevent CoASH sequestration and to facilitate excretion of chain-shortened carboxylic acids, acyl-CoA thioesterases, which catalyze the hydrolysis of acyl-CoAs to the free acid and CoASH, may play important roles. Here we have cloned and characterized a peroxisomal acyl-CoA thioesterase from mouse, named PTE-2 (peroxisomal acyl-CoA thioesterase 2). PTE-2 is ubiquitously expressed and induced at mRNA level by treatment with the peroxisome proliferator WY-14,643 and fasting. Induction seen by these treatments was dependent on the peroxisome proliferator-activated receptor ␣. Recombinant PTE-2 showed a broad chain length specificity with acyl-CoAs from short-and medium-, to long-chain acyl-CoAs, and other substrates including trihydroxycoprostanoyl-CoA, hydroxymethylglutaryl-CoA, and branched chain acyl-CoAs, all of which are present in peroxisomes. Highest activities were found with the CoA esters of primary bile acids choloyl-CoA and chenodeoxycholoyl-CoA as substrates. PTE-2 activity is inhibited by free CoASH, suggesting that intraperoxisomal free CoASH levels regulate the activity of this enzyme. The acyl-CoA specificity of recombinant PTE-2 closely resembles that of purified mouse liver peroxisomes, suggesting that PTE-2 is the major acyl-CoA thioesterase in peroxisomes. Addition of recombinant PTE-2 to incubations containing isolated mouse liver peroxisomes strongly inhibited bile acidCoA:amino acid N-acyltransferase activity, suggesting that this thioesterase can interfere with CoASH-dependent pathways. We propose that PTE-2 functions as a key regulator of peroxisomal lipid metabolism.Peroxisomes are cellular organelles present in all eukaryotic cells. They play an indispensable role in the metabolism of a variety of lipids including very long-chain fatty acids, dicarboxylic fatty acids, bile acids, prostaglandins, leukotrienes, thromboxanes, pristanic acid, and xenobiotic fatty acids (for review, see Refs. 1 and 2). The peroxisomal -oxidation system contains two sets of enzymes, one of which is involved in the oxidation of branched chain fatty acids and intermediates in the hepatic bile acid biosynthetic pathway and consists of one or two branched-chain acyl-CoA oxidase(s), a D-specific bifunctional protein and the sterol carrier-like protein x (SCPx). The second pathway is involved in the oxidation of very long straight-chain fatty acids, CoA esters of prostaglandins, leukotrienes, and thromboxanes (prostanoids) and dicarboxylic acids. This system is composed of a straight-chain acyl-CoA oxidase, an L-specific bifunctional protein and straight-chain 3-ke...