The TSH receptor binding and thyroid stimulating properties of (Fab)2 and Fab fragments of Graves' IgG have been investigated. (Fab)2 fragments were prepared by pepsin digestion of IgG and Fab fragments by reduction of (Fab)2 or papain digestion of IgG. (Fab)2 and Fab were effective in inhibiting TSH binding to its receptor with all five patients' sera studied and both preparations stimulated cyclic AMP release from isolated thyroid cells. However Fab fragments were less active thyroid stimulators than their parent (Fab)2 in all five cases. These studies indicate that antibody divalency is not essential for thyroid stimulation by TSH receptor antibodies.