Phytanic acid is a saturated, branched-chain fatty acid which as a consequence of the presence of a methyl group at the 3-position cannot be degraded by beta-oxidation. Instead, phytanic acid first undergoes alpha-oxidation to yield pristanic acid which can be degraded by beta-oxidation. The structure of the alpha-oxidation pathway and its subcellular localization has remained an enigma although there is convincing evidence that 2-hydroxyphytanic acid is an obligatory intermediate. We have now studied the degradation of 2-hydroxyphytanic acid in both rat and human liver. The results show that 2-hydroxyphytanic acid is converted to 2-ketophytanic acid in homogenates of rat as well as human liver. Detailed studies in rat liver showed that the enzyme involved is localized in peroxisomes accepting molecular oxygen as second substrate and producing H2O2. 2-Ketophytanic acid formation from 2-hydroxyphytanic acid was found to be strongly deficient in liver samples from Zellweger patients which lack morphologically distinguishable peroxisomes. The latter results not only provide an explanation for the elevated levels of 2-hydroxyphytanic acid in Zellweger patients but also suggest that the subcellular localization of 2-hydroxyphytanic acid dehydrogenation is identical in rat and man, i.e., in peroxisomes.