In mammalian selenoprotein mRNAs, the recognition of UGA as selenocysteine requires selenocysteine insertion sequence (SECIS) elements that are contained in a stable stem-loop structure in the 3' untranslated region (UTR). In this study, we investigated the SECIS elements and cellular proteins required for selenocysteine insertion in rat phospholipid hydroperoxide glutathione peroxidase (PhGPx). We developed a translational readthrough assay for selenoprotein biosynthesis by using the gene for luciferase as a reporter. Insertion of a UGA or UAA codon into the coding region of luciferase abolished luciferase activity. However, activity was restored to the UGA mutant, but not to the UAA mutant, upon insertion of the PhGPx 3' UTR. The 3' UTR of rat glutathione peroxidase (GPx) also allowed translational readthrough, whereas the PhGPx and GPx antisense 3' UTRs did not. Deletion of two conserved SECIS elements in the PhGPx 3' UTR (AUGA in the 5' stem or AAAAC in the terminal loop) abolished readthrough activity. UV cross-linking studies identified a 120-kDa protein in rat testis that binds specifically to the sense strands of the PhGPx and GPx 3' UTRs. Direct cross-linking and competition experiments with deletion mutant RNAs demonstrated that binding of the 120-kDa protein requires the AUGA SECIS element but not AAAAC. Point mutations in the AUGA motif that abolished protein binding also prevented readthrough of the UGA codon. Our results suggest that the 120-kDa protein is a significant component of the mechanism of selenocysteine incorporation in mammalian cells.