Previous studies from our laborataory have shown 1,25-dihydroxyvitamin D-3 [1,25(OH)(2)D-3] production by rat liver homogenates and a low affinity of the hepatic enzyme for 25-hydroxyvitamin D-3. Because the liver microsomal vitamin D-25-hydroxylase is the main source of systemic 25(OH)D-3, we examined the subcellular location and the kinetics of liver 1,25(OH)(2)D-3 production. Unlike the renal 1 alpha-hydroxylase activity which was assayed simultaneously, 1,25(OH)(2)D-3 synthesis was undetectable in rat liver mitochondria, whereas in microsomes, 1,25(OH)(2)D-3 production followed typical Michaelis Menten kinetics with a Km for 25(OH)D-3 of 13.4 mu M and a Vmax of 109.8 pg/min per mg protein accounting for most of the 1,25(OH)(2)D-3 synthesized by rat liver cytosol free homogenates. Thus, microsomes are the site for 1,25(OH)(2)D-3 synthesis in the rat liver, This microsomal compartmentalization of the two major steps in the activation of vitamin D to 1,25(OH)(2)D-3 suggests a role for the liver as an autocrine/paracrine organ for 1,25(OH)(2)D-3.