The conversion of thyroxine to 3,5,3'-triiodothyronine (T3) is the first step in thyroid hormone action, and the Type I iodothyronine deiodinase supplies most of this extrathyroidal T3 in the rat. We found that the cDNA coding for this enzyme contains an in-frame UGA encoding the rare amino acid selenocysteine. Using site-directed mutagenesis, we have converted selenocysteine to cysteine and expressed the wild-type and cysteine mutant enzymes in JEG-3 cells by transient transfection. The kinetic properties of the transiently expressed wild-type enzyme are nearly identical to those reported for rat liver Type I deiodinase. Substitution of sulfur for selenium causes a 10-fold increase in the Km of the enzyme for the favored substrate 3,3',5'-triiodothyronine (rT3), a 100-fold decrease in the sensitivity of rT3 deiodination to competitive inhibition by gold and a 300-fold increase in the apparent Ki for uncompetitive inhibition by 6-n-propylthiouracil. These results demonstrate that selenium is responsible for the biochemical properties which characterize Type I iodothyronine monodeiodination.