The properties and kinetic characteristics of a non-GSH NADPH-dependent cofactor system activating rat hepatic and renal 5'-deiodinase (5'-DI), which we have previously demonstrated with partially purified cytosol Fractions A and B [Sawada, Hummel & Walfish (1986) Biochem. J. 234, 391-398], were examined further. Although microsomal fractions prepared from either rat liver or kidneys could be activated by crude cytosol Fractions A and B from those tissues as well as from rat brain and heart, a homologous hepatic or renal system was the most potent in producing 5'-deiodination of reverse tri-iodothyronine (rT3). At nanomolar concentrations both rT3 and thyroxine (T4) were deiodinated but with a much greater substrate preference for rT3 than for T4. However, at micromolar concentrations of these substrates no activation of 5'-DI could be detected. In this deiodinative system, T4 and tri-iodothyronine (T3) competitively inhibited 5'-deiodination of rT3. Dicoumarol, iopanoate, arsenite and diamide were also inhibitory to the activation of hepatic or renal 5'-deiodination by this cofactor system. Purification of cofactor components in hepatic crude cytosolic Fractions A and B to near homogeneity, as assessed by their enzymic and physical properties, indicated that these co-purified with and were therefore identical with thioredoxin reductase and thioredoxin respectively, and accounted almost entirely for the observed activation of rT3 5'-DI. When highly purified liver cytosolic thioredoxin reductase and thioredoxin were utilized to determine the kinetic characteristics of the reaction, evidence for a sequential mechanism operative at nanomolar but not micromolar concentrations of rT3 and T4 was obtained. The Km for rT3 was 1.4 nM. Inhibition by 6-n-propyl-2-thiouracil (Ki 6.7 microM) was competitive with respect to thioredoxin and non-competitive with respect to rT3, whereas inhibition by T4 (Ki 1.3 microM) was competitive. Since rT3 is a potent inhibitor of T4 5'-deiodination, this thioredoxin system activating deiodination of rT3 may play an important role in regulating the rate of intracellular production of T3 from T4.