Methimazole produces a significant inhibition of iodide ion absorption by the intact thyroid which may account for the major portion of its antithyroidal action. The principal intrathyroidal effect of methimazole is shown to be due to its reactivity with elemental iodine. It neither inhibits nor serves as a competitive substrate for the hydrogen peroxide-peroxidase enzyme system. Thyroxine is displaced from its serum binding sites by methimazole; however, this mechanism is not considered to be clinically important.