A cDNA of 1992 base pairs encoding the complete rat liver cytosolic epoxide hydrolase has been isolated using a polymerase chain reaction-derived DNA fragment (Arand, M., Knehr, M., Thomas, H., Zeller, H. D., and Oesch, F. (1991) FEBS Lett. 294, 19-22) known to represent the 3'-end of the cytosolic epoxide hydrolase mRNA. Sequence analysis revealed an open reading frame of 1662 nucleotides corresponding to 554 amino acids (M(r) = 62,268). The DNA sequence obtained did not display significant homology to the sequences of microsomal epoxide hydrolase or leukotriene A4 hydrolase or to any other DNA included in the EMBL Data Bank (release 32). On Northern blotting of rat liver RNA, a single mRNA species was detected that was strongly induced on treatment of the animal with fenofibrate, a potent peroxisome proliferator. The most significant structure of the deduced protein is a modified peroxisomal targeting signal (Ser-Lys-Ile) at the carboxyl terminus that is regarded to be responsible for the unusual dual localization of the cytosolic epoxide hydrolase in peroxisomes as well as in the cytosol. In addition, a leucine zipper-like motif was identified at the amino terminus. Its possible implication for the observed dimeric structure of cytosolic epoxide hydrolase is discussed. The isolated cDNA was expressed in bacteria to yield a catalytically active enzyme. Specific activity of the crude lysate obtained exceeded that of rat liver cytosols from maximally induced animals by a factor of 8.