Pyroglutamyl peptidase II (PPII), a highly specific membrane-bound metallopeptidase that inactivates TRH in the extracellular space, is tightly regulated by thyroid hormone in cells of the anterior pituitary. Whether PPII has any role in the region where axons containing hypophysiotropic TRH terminate, the median eminence, is unknown. For this purpose, we analyzed the cellular localization and regulation of PPII mRNA in the mediobasal hypothalamus in adult, male rats. PPII mRNA was localized in cells lining the floor and infralateral walls of the third ventricle and coexpressed with vimentin, establishing these cells as tanycytes. PPII mRNA extended in a linear fashion from the tanycyte cell bodies in the base of the third ventricle to its cytoplasmic and end-feet processes in the external zone of the median eminence in close apposition to pro-TRH-containing axon terminals. Compared with vehicle-treated, euthyroid controls, animals made thyrotoxic by the i.p. administration of 10 microg L-T(4) daily for 1-3 d, showed dramatically increased accumulation of silver grains in the mediobasal hypothalamus and an approximately 80% increase in enzymatic activity. PPII inhibition in mediobasal hypothalamic explants increased TRH secretion, whereas i.p. injection of a specific PPII inhibitor increased cold stress- and TRH-induced TSH levels in plasma. We propose that an increase in circulating thyroid hormone up-regulates PPII activity in tanycytes and enhances degradation of extracellular TRH in the median eminence through glial-axonal associations, contributing to the feedback regulation of thyroid hormone on anterior pituitary TSH secretion.