We have investigated whether hepatic peroxisomes are capable of synthesizing carnitine. When purified peroxisomes were incubated with gamma-butyrobetaine, a precursor of carnitine, formation of carnitine was observed. These results indicate that peroxisomes contain gamma-butyrobetaine hydroxylase, the enzyme which catalyzes the final step in the biosynthesis of carnitine. This enzyme was previously believed to be present only in the cytosol. gamma-Butyrobetaine hydroxylase activity in peroxisomes was not due to cytosolic contamination as evaluated by marker enzyme analysis. When proliferation of peroxisomes was induced by clofibrate treatment, gamma-butyrobetaine hydroxylase/mass liver increased by 7.6-fold and the specific activity by 2.5-fold. We conclude that hepatic peroxisomes synthesize carnitine and this synthesis becomes substantial under conditions of peroxisomal proliferation.