Fatty acid beta-oxidation was investigated in highly purified mitochondrial and peroxisomal preparations from rat liver. Under isotonic conditions, pristanic and homophytanic acid beta-oxidation in purified peroxisomes was severalfold greater compared to the oxidation in purified mitochondria. Branched chain fatty acid beta-oxidation in purified mitochondria was very low, and the oxidation was not stimulated by exogenous L-carnitine or L-malate. In contrast, stearic acid beta-oxidation by purified mitochondria depended upon exogenous L-carnitine, and the oxidation was stimulated by L-malate. Both mitochondrial and peroxisomal beta-oxidation of branched chain fatty acids was strongly inhibited by fatty acid-free bovine serum albumin, whereas stearic acid oxidation was either unaffected or slightly inhibited by bovine serum albumin. The results presented clearly indicate that branched chain fatty acids are mainly degraded in peroxisomes in rat liver. Branched chain fatty acids were efficiently converted to coenzyme A thioesters by purified mitochondria, peroxisomes, and microsomes. Although pristanic and phytanic acids were rapidly converted to pristanoyl-CoA and phytanoyl-CoA, respectively, they were not converted to carnitine esters by mitochondrial outer membranes. The results indicate that acyl-CoA synthetase and carnitine acyltransferase located at the mitochondrial outer membranes regulate entry of branched chain fatty acids into mitochondria. Mitochondrial carnitine acyltransferase I appears to be highly specific for straight chain fatty acids and restricts entry of branched chain fatty acids into mitochondria. Thus, branched chain fatty acids which cannot be transported across the mitochondrial membranes via the carnitine acyltransferase system are directed to peroxisomes for beta-oxidation. The results reported indicate that phytanic acid, the fatty acid which can be initially degraded by alpha-oxidation due to the presence of a beta-methyl group in the molecule, cannot be transported across the mitochondrial membranes. The data presented strongly suggest that phytanic acid alpha-oxidation occurs in organelles other than mitochondria and possibly in peroxisomes.