Phytanoyl-CoA hydroxylase (PhyH) catalyzes the conversion of phytanoyl-CoA to 2-hydroxyphytanoyl-CoA, which is the first step in the phytanic acid alpha-oxidation pathway. Recently, several studies have shown that in humans, phytanic acid alpha-oxidation is localized in peroxisomes. In rat, however, the alpha-oxidation pathway has been reported to be mitochondrial. In order to clarify this differential subcellular distribution, we have studied the rat PhyH protein. We have purified PhyH from rat liver to apparent homogeneity as judged by SDS-PAGE. Sequence analysis of two PhyH peptide fragments allowed cloning of the rat PHYH cDNA encoding a 38. 6 kDa protein. The deduced amino acid sequence revealed strong homology to human PhyH including the presence of a peroxisome targeting signal type 2 (PTS2). Heterologous expression of rat PHYH in Saccharomyces cerevisiae yielded a 38.6 kDa protein whereas the PhyH purified from rat liver had a molecular mass of 35 kDa. This indicates that PhyH is probably processed in rat by proteolytic removal of a leader sequence containing the PTS2. This type of processing has been reported in several other peroxisomal proteins that contain a PTS2. Subcellular localization studies using equilibrium density centrifugation showed that PhyH is indeed a peroxisomal protein in rat. The finding that PhyH is peroxisomal in both rat and humans provides strong evidence against the concept of a differential subcellular localization of phytanic acid alpha-oxidation in rat and human.