Refsum disease is an autosomal recessive disorder characterized by retinitis pigmentosa, peripheral polyneuropathy, cerebellar ataxia and increased cerebrospinal fluid protein. Biochemically, the disorder is defined by two related properties: pronounced accumulation of phytanic acid and selective loss of the peroxisomal dioxygenase required for alpha-hydroxylation of phytanoyl-CoA2. Decreased phytanic-acid oxidation is also observed in human cells lacking PEX7, the receptor for the type-2 peroxisomal targetting signal (PTS2; refs 3,4), suggesting that the enzyme defective in Refsum disease is targetted to peroxisomes by a PTS2. We initially identified the human PAHX and mouse Pahx genes as expressed sequence tags (ESTs) capable of encoding PTS2 proteins. Human PAHX is targetted to peroxisomes, requires the PTS2 receptor for peroxisomal localization, interacts with the PTS2 receptor in the yeast two-hybrid assay and has intrinsic phytanoyl-CoA alpha-hydroxylase activity that requires the dioxygenase cofactor iron and cosubstrate 2-oxoglutarate. Radiation hybrid data place PAHX on chromosome 10 between the markers D10S249 and D10S466, a region previously implicated in Refsum disease by homozygosity mapping. We find that both Refsum disease patients examined are homozygous for inactivating mutations in PAHX, demonstrating that mutations in PAHX can cause Refsum disease.