Rat peroxisomal multifunctional enzyme type 1 (perMFE-1) is a monomeric protein of beta-oxidation. We have defined five functional domains (A, B, C, D and E) in the perMFE-1 based on comparison of the amino acid sequence with homologous proteins from databases and structural data of the hydratase-1/isomerases (H1/I) and (3 S )-hydroxyacyl-CoA dehydrogenases (HAD). Domain A (residues 1-190) comprises the H1/I fold and catalyses both 2-enoyl-CoA hydratase-1 and Delta(3)-Delta(2)-enoyl-CoA isomerase reactions. Domain B (residues 191-280) links domain A to the (3 S )-dehydrogenase region, which includes both domain C (residues 281-474) and domain D (residues 480-583). Domains C and D carry features of the dinucleotide-binding and the dimerization domains of monofunctional HADs respectively. Domain E (residues 584-722) has sequence similarity to domain D of the perMFE-1, which suggests that it has evolved via partial gene duplication. Experiments with engineered perMFE-1 variants demonstrate that the H1/I competence of domain A requires stabilizing interactions with domains D and E. The variant His-perMFE (residues 288-479)Delta, in which the domain C is deleted, is stable and has hydratase-1 activity. It is proposed that the extreme C-terminal domain E in perMFE-1 serves the following three functions: (i) participation in the folding of the N-terminus into a functionally competent H1/I fold, (ii) stabilization of the dehydrogenation domains by interaction with the domain D and (iii) the targeting of the perMFE-1 to peroxisomes via its C-terminal tripeptide.