Context: The recent cloning of the human iodotyrosine deiodinase (IYD) gene enables the investigation of iodotyrosine dehalogenase deficiency, a form a primary hypothyroidism resulting from iodine wasting, at the molecular level. Objective: In the current study, we identify the genetic basis of dehalogenase deficiency in a consanguineous family. Results: Using HPLC tandem mass spectrometry, we developed a rapid, selective, and sensitive assay to detect 3-monoiodo-L-tyrosine and 3,5-diodo-L-tyrosine in urine and cell culture medium. Two subjects from a presumed dehalogenase-deficient family showed elevated urinary 3-monoiodo-L-tyrosine and 3,5-diodo-L-tyrosine levels compared with 57 normal subjects without thyroid disease. Subsequent analysis of IYD revealed a homozygous missense mutation in exon 4 (c.658G>A p.Ala220Thr) that co-segregates with the clinical phenotype in the family. Functional characterization of the mutant iodotyrosine dehalogenase protein showed that the mutation completely abolishes dehalogenase enzymatic activity. One of the heterozygous carriers for the inactivating mutation recently presented with overt hypothyroidism indicating dominant inheritance with incomplete penetration. Screening of 100 control alleles identified one allele positive for this mutation, suggesting that the c.658G>A nucleotide substitution might be a functional single nucleotide polymorphism. Conclusions: This study describes a functional mutation within IYD, demonstrating the molecular basis of the iodine wasting form of congenital hypothyroidism. This familial genetic defect shows a dominant pattern of inheritance with incomplete penetration.