Differential centrifugation of homogenates of prelabeled dog thyroid tissue provides a fraction, sedimenting between 800 and 15, 000 Xg, that contains both colloid drop-lets and lysosomes. When these fractions from control and TSH-stimu-lated lobes are suspended in 0.45 [image] sucrose, the 131iodoprotein remains largely particle bound over a pH range of 3.6-8. 5. Control lobe particles show lysis of the labeled protein as BE131I [butanol extractable 131iodine] during these in vitro incubations with peak activity at pH 35-4.0, the optimum of lysosomal cathepsin. TSH particles contain more total 131iodoprotein than controls and show not only more BE131I release than controls, but also a greater percentage of the particulate 131I released as BE131I. Furthermore, it is apparent that the lysis of 131iodoprotein in the TSH particles occurs maximally at a higher pH, 46-5.0, than in the control particles. When the particles are destroyed with a detergent, Triton X-100, there is inhibition of proteolysis. These studies, in combination with previous observations on the TSH-enhanced increase in newly formed colloid droplets and on characteristics of thyroid lysosomal cathepsin, suggest that release of thyroid hormone induced by TSH occurs in intracellular particles containing both substrate and protease.