To determine whether the type 2 iodothyronine deiodinase (D2), the principal central nervous system enzyme converting T₄ to biologically active T₃, is regulated in tanycytes by immune activation, D2 activity was measured in the mediobasal hypothalamus (MBH) 4, 12, and 24 h after administration of bacterial lipopolysaccharide (LPS) and compared with D2 levels in the cortex and anterior pituitary of rats. In contrast to D2 activity in the cortex and anterior pituitary that showed a steady linear increase over 24 h, which was coincident with a decline in thyroid hormone and TSH levels, D2 activity peaked in the MBH 12 h after LPS administration. By in situ hybridization, the increased D2 mRNA synthesis induced by LPS was specifically localized to tanycytes lining the third ventricle. In vitro assays in HC11 and HEK-293 cells demonstrated that the p65 subunit of nuclear factor-κB markedly increased both rat and human D2 genes (dio2) as analyzed by promoter assays. No activation of human dio2 was observed when an 83-bp minimal promoter was used. We propose that LPS or LPS-induced cytokines directly induce D2 mRNA in tanycytes. The ensuing MBH-specific D2-mediated local thyrotoxicosis may suppress the hypothalamus-pituitary-thyroid axis by local feedback inhibition of hypophysiotropic TRH and/or TSH and contribute to the mechanism of central hypothyroidism associated with infection.