Cultured human keratinocytes converted T4 to T3 by type II iodothyronine deiodination. Homogenates of keratinocytes cultured from neonatal foreskin or adult arm skin had similar mean T4 5'-deiodinating activities. Conversion of T4 to T3 by intact cells was demonstrable in cultures from neonatal and adult donors. Only phenolic ring deiodination occurred in the cultured cells and their homogenates, the apparent Michaelis constant for T4 was 12 nmol/L, and T4 and rT3 each inhibited 5'-deiodination of the other. T4 5'-deiodination was unaffected by addition to the assay mixture of 1 mumol/L T3, but was inhibited less than 10% by 1 mmol/L 6-n-propyl-2-thiouracil, 50% by 270 nmol/L iopanoic acid, 50% by 9.4 mumol/L 3,5-diiodo- 3',5'-dimethyl-L-thyronine, and 33% by 42 mumol/L amiodarone. When keratinocytes were cultured for 3-4 days in medium containing iodothyronine-free fetal calf serum, the T4 5'-deiodination rates in homogenates doubled; this increase was prevented by restoring a physiological free T4 concentration, but not by a supraphysiological T3 concentration. Homogenates of fresh whole skin or fetal cadaveric epidermis did not convert T4 to T3 in measureable amounts, although one epidermal homogenate had low level T3 typrosyl-ring deiodinating activity. These results suggest that human epidermal type II iodothyronine deiodination in man might conceivably contribute to the intracellular T3 content of the skin and even to serum T3 concentrations, especially in hypothyroidism.