A second dermatan sulfate epimerase (DS-epi2) was identified as a homolog of the first epimerase (DS-epi1), which was previously described by our group. DS-epi2 is 1,222 amino acids long and has an approximately 700-amino acid N-terminal epimerase domain that is highly conserved between the two enzymes. In addition, the C-terminal portion is predicted to be an O-sulfotransferase domain. In this study we found that DS-epi2 has epimerase activity, which involves conversion of d-glucuronic acid to l-iduronic acid (EC 5.1.3.19), but no O-sulfotransferase activity was detected. In dermatan sulfate, iduronic acid residues are either clustered together in blocks or alternating with glucuronic acid, forming hybrid structures. By using a short interfering RNA approach, we found that DS-epi2 and DS-epi1 are both involved in the biosynthesis of the iduronic acid blocks in fibroblasts and that DS-epi2 can also synthesize the hybrid structures. Both iduronic acid-containing domains have been shown to bind to several growth factors, many of which have biological roles in brain development. DS-epi2 has been genetically linked to bipolar disorder, which suggests that the dermatan sulfate domains generated by a defective enzyme may be involved in the etiology of the disease.