The antithyroid drugs propylthiouracil and methimazole exert their effects on the thyroid gland by inhibiting thyroid peroxidase. In addition to this effect, these drugs have been reported to inhibit prostaglandin production in both the thyroid gland and the kidney. The purpose of our studies was to evaluate the mechanism of the effects of these drugs on prostaglandin production. Both propylthiouracil and methimazole reversibly inhibited prostaglandin E2 production in both inner medullary slices and isolated renal papillary collecting tubule cells. The inhibition of arachidonic acid-induced increases in PGE2 production indicated that the effects of methimazole and propylthiouracil were on the enzyme complex prostaglandin H synthase, and not on the phospholipase mechanisms responsible for the release of arachidonic acid from tissue phospholipids. Propylthiouracil inhibited both arachidonic acid and hydrogen peroxide-dependent binding of 14C-N-[4-(5-nitro-2-furyl)-2-thiazolyl]formamide to protein, indicating that the effect of propylthiouracil is on the hydroperoxidase and not on the cyclooxygenase component of prostaglandin H synthase. Our data also indicate the potential of the antithyroid drugs for inhibition of metabolism of drugs and xenobiotics by prostaglandin H synthase. Metabolism of both methimazole and propylthiouracil by the hydroperoxidase component of prostaglandin H synthase was demonstrated. It is proposed that this interaction with the hydroperoxidase component of prostaglandin H synthase is at least in part the mechanism by which propylthiouracil and methimazole inhibit prostaglandin production. The inhibition of tissue peroxidase provides these agents with the capability to prevent the peroxidatic metabolism of drugs and xenobiotics.