The cofactor product of the aromatic amino acid hydroxylases, 4a-hydroxy-6(R)-tetrahydrobiopterin, requires dehydration before tetrahydrobiopterin can be regenerated by dihydropteridine reductase. Carbinolamine dehydration occurs nonenzymatically, but the reaction is also catalyzed by 4a-hydroxytetrahydropterin dehydratase. This enzyme has the identical amino acid sequence to DCoH, the dimerization cofactor of the transcription regulator, HNF-1 alpha. The catalytic activity of rat liver dehydratase was characterized using a new assay employing chemically synthesized 4a-hydroxytetrahydropterins. The enzyme shows little sensitivity to the structure or configuration of the 6-substituent of its substrate, with Km's for 6(S)-methyl, 6(R)-methyl, 6(S)-propyl, and 6(R)-L-erythro-dihydroxypropyl all between 1.5 and 6 microM. Turnover numbers at 37 degrees C are 50-90 s-1 at pH 7.4 and 2.5-3-fold lower at pH 8.4. Both 4a(R)- and 4a(S)-hydroxytetrahydropterins are good substrates. The quinoid dihydropterin products are strong inhibitors of the dehydratase with KI's about one half of their respective Km's, but no inhibition was observed with 7,8-dihydropterins or tetrahydropterins. The enzyme contains no metals and no phosphorus. Reaction mechanisms which involve either acid and/or base catalysis are discussed. 4a-Hydroxy-6(R)-tetrahydrobiopterin was determined not to be a product inhibitor of phenylalanine hydroxylase. It is concluded that the dehydratase (which was found to be 6 microM in rat liver) is essential in vivo to prevent rearrangement of 4a-hydroxy-6(R)-tetrahydrobiopterin and to maintain the supply of tetrahydrobiopterin cofactor for the hydroxylases under conditions where the nonenzymatic rate would be inadequate.