The metabolism of thyroxine (T 4) by cultures of embryonic-rat brain cells grown in a chemically defined medium was studied. Cells in these cultures were predominantly neurons, characterized by the developmental increase of the binding of [ 3H]flunitrazepam to the high-affinity (0.67 nM) benzodiazepine neuronal receptors. The cultures also contained astrocytes, characterized by immunological studies using an anti-glial fibrillary acidic protein (GFAp) and by the increase in glutamine synthetase (GS). Incubation of the cells, in situ, with 125I-labelled 3,5,3'-triiodothyronine (T 3) showed the presence of a single class of high-affinity nuclear receptors for T 3 with a maximal binding capacity of 270–470 fmol T 3/mg DNA and a K d of 63 ± 13 pM. Cells incubated in situ with 50 pM [ 125I]T 4 actively metabolized the hormone. The major metabolite, 3,3',5'-triiodothyronine (rT 3) (159 ± 43 fmol/4 h/mg DNA), was almost completely released into the medium. T 3 was a minor metabolite (77 ± 3 fmol/4 h/mg DNA), 75% of which accumulated in the cells. Of this T 3, 35% was bound to the nuclear receptors after 4 h of incubation. In vitro assays showed that the 5'-deiodinase activity increased during culture and the 5-deiodinase decreased slightly. Cytosine-arabinoside (ARAc) treatment of the cultures reduced the DNA content per culture dish, corresponding to a fall in the number of GFAp-positive cells (astrocytes) and to a decrease in GS. A small increase in the number of benzodiazepine sites was observed. ARAc treatment markedly reduced the T 3 production (14.5 ± 0.7 fmol/4 h/mg DNA) and did not change the rT 3 production. We suggest that T 4 is metabolized to T 3 in astrocytes, taken up by neurons and binds to their nuclear receptors.