Type 2 deiodinase (D2) catalyzes the 5'-deiodination of thyroxine to form 3,5,3'-triiodothyronine. Two mammalian D2 cDNAs have been identified containing 2 kilobases (kb) of the 7-kb mRNA including the complete coding sequence. Both contain in-frame TGA codons, which should serve as selenocysteine codons. However, the selenocysteine insertion sequence (SECIS) elements required for the decoding of UGA as a selenocysteine in the 3'-untranslated region (UTR) of the mRNA are not present. We have identified two overlapping expressed sequence tag clones, which contain the missing 4.4-kb 3'-UTR of the human D2 (hD2) cDNA. Computer analysis predicts a stem loop structure 280 base pairs 5' to the polyadenylation site, which has potent SECIS activity. A fragment containing these sequences hybridizes to D2 mRNA in human thyroid. A G to A mutation in the essential AUGA motif of this element abolished its function. Transfection of the hD2 coding region plus the 3'-UTR results in the expression of D2, and its in vitro transcribed mRNA programs D2 activity in Xenopus oocytes. This is the first identification of a SECIS element in a mammalian D2 cDNA and establishes that hD2 is a bona fide selenoprotein.