Type 3 deiodinase (D3), the physiologic inactivator of thyroid hormones, is induced during tissue injury and regeneration. This has led to the hypotheses that D3 impacts injury tolerance by reducing local T3 signaling and contributes to the fall in serum triiodothyronine (T3) observed in up to 75% of sick patients (termed the low T3 syndrome). Here we show that a novel mutant mouse with hepatocyte-specific D3 deficiency has normal local responses to toxin-induced hepatonecrosis, including normal degrees of tissue necrosis and intact regeneration, but accelerated systemic recovery from illness-induced hypothyroxinemia and hypotriiodothyroninemia, demonstrating that peripheral D3 expression is a key modulator of the low T3 syndrome.