Mammalian type I iodothyronine deiodinase (D1) activates and inactivates thyroid hormone by outer ring deiodination (ORD) and inner ring deiodination (IRD), respectively, and is potently inhibited by propylthiouracil (PTU). Here we describe the cloning and characterization of a complementary DNA encoding a PTU-insensitive D1 from teleost fish (Oreochromis niloticus, tilapia). This complementary DNA codes for a protein of 248 amino acids, including a putative selenocysteine (Sec) residue, encoded by a TGA triplet, at position 126. The 3' untranslated region contains two putative Sec insertion sequence (SECIS) elements. Recombinant enzyme expressed in COS-1 cells catalyzes both ORD of T4 and rT3 and IRD of T3 and T3 sulfate with the same substrate specificity as native tilapia D1 (tD1), i.e. rT3 >> T4 > T3 sulfate > T3. Native and recombinant tD1 show equally low sensitivities to inhibition by PTU, iodoacetate, and gold thioglucose compared with the potent inhibitions observed with mammalian D1s. Because the residue 2 positions downstream from Sec is Pro in tD1 and in all (PTU-insensitive) type II and type III iodothyronine deiodinases but Ser in all PTU-sensitive D1s, we prepared the Pro128Ser mutant of tD1. The mutant enzyme showed strongly decreased ORD and somewhat increased IRD activity, but was still insensitive to PTU. These results provide new information about the structure-activity relationship of D1 concerning two characteristic properties, i.e. catalysis of both ORD and IRD, and inhibition by PTU.