The first step in the biogenesis of thyroid hormones is the oxidation of iodides taken up by the thyroid gland. Oxidation of I- by the H2O2/peroxidase system leads to the formation of iodinium ions I+ which bond to thyroglobulin by electrophilic substitution. However, it is not clear whether I- is transformed directly to I+ or whether it passes through a molecular iodine intermediate. This latter possibility is indicated by the oxidation potentials of the reactions. I2 can be detected in vitro from the formation of I3- ions, although this has yet to be confirmed in vivo. The present study was designed to determine, albeit indirectly, whether this reaction occurs in vivo. If I2 is produced, it may form charge transfer complexes with numerous drugs. We also investigated the action of various drugs on lactoperoxidase and assessed their antithyroid activity in the rat by assay of plasma levels of T3, T4, and TSH. We found a good correlation between the value of Kc, the formation constant of the complex of the drug with molecular iodine, and the antithyroid activity in vivo. This correlation was observed in four different classes of compound. The possibility that molecular iodine is produced in the thyroid gland has implications for antithyroid therapy.