Subcellular fractionation studies of rat liver localized the activity of palmitoyl-L-carnitine hydrolase [EC 3.1.1.28] to the microsomal fraction whereas palmitoyl-CoA hydrolase activity was found both in the microsomal fraction and in mitochondria. An unusual biphasic saturation curve for palmitoyl-CoA was observed when intact mitochondria were used, possibly reflecting the existence of an intramitochondrial hydrolase activity. Disruption of the mitochondrial structure doubled the palmitoyl-CoA hydrolysis. Discontinuous sucrose gradient centrifugation and digitonin fractionation of rat liver mitochondria demonstrated that a palmitoyl-CoA hydrolase was associated with the matrix fraction. Pure matrix and microsomal fractions showed that the 2 hydrolase activities were differently affected by the presence of divalent cations. Both the specific activity and the saturation concentration of palmitoyl-CoA were higher for the microsomal enzyme than for the matrix-associated enzyme.