Rat liver mitochondria were found to hydroxylate epsilon-N-trimethyl-L-lysine to produce beta-hydroxy-epsilon-N-trimethyl-L-lysine, an intermediate in carnitine biosynthesis. The hydroxylating system requires alpha-ketoglutarate, Fe2+, and ascorbate, but does not require NADPH nor NADH. No activity was found in the microsomal or soluble fractions of liver extracts. The hydroxylated alpha-amino acid was isolated and characterized by column chromatography using Dowex 50-H+ and Chelex 100-Cu2+ resins and by high voltage paper electrophoresis. The enzymatically produced beta-hydroxy-epsilon-N-trimethyl-L-lysine was shown to be periodate-sensitive and one periodation product was characterized as gamma-butyrobetaine aldehyde. The hydroxylated product was acted upon by crystalline serine transhydroxymethylase (EC 2.1.2.1) to yield gamma-butyrobetaine aldehyde and glycine. Conversion of about 40% of the epsilon-N-trimethyl-L-lysine to beta-hydroxy-epsilon-N-trimethyl-L-lysine was accomplished by this system with little or no further metabolism.