In the chick embryo liver, generation of T₃ from T₄ by 5′-deiodinating (5′D) systems is reported to be minimal until just before hatching, which occurs on day 21 of incubation. Studies were, therefore, performed to determine whether this is due to the absence of a 5′D system until late in development or to the presence of an active 5-deiodinating (5D) system capable of converting T₄ to rT₃ and T₃ to 3,3′-diiodothyronine. Studies were performed in microsomes of liver from 15 to 21-day-old chick embryos. T₃ was formed from T₄ in microsomes from embryos at all stages studied provided that the substrate concentration was at least 5 × 10^-8 M. However, T₄ could not be employed for studying changes in 5′D activity because the T₃ formed underwent further degradation, and the T₄ was also metabolized by 5D systems. rT₃ was used instead, since its metabolism was less complex than that of T₄, and Eadie-Hofstee plots of kinetic data were linear. Development was associated with a more than 2-fold increase in the maximum velocity of 5′D activity; there was no change in Km. 5D activity, which was studied using T₃ as substrate, also exhibited linear reaction kinetics. 5D activity was highest on day 15 and decreased by more than 90% during the last 2 days of development due entirely to a decrease in the maximum velocity. Other characteristics of the two enzymes (substrate preference and inhibitor effects) indicate that they are comparable to the type I and III deiodinases found in mammalian systems. It is concluded that the failure to observe T₃ generation from T₄ in the developing chick until close to hatching, when substrate concentrations are below 5 × 10^-8 M, is due primarily to the presence of an active deiodinase which rapidly converts T₄ and T₃ to inactive analogs. It is suggested that the amount of T₃ required by the developing embryo is extremely critical and the two enzyme systems act in a coordinated way to protect hepatic T₃-sensitive mechanisms from overexposure to T₃. (Endocrinology120: 2604–2610,1987)