We studied the distribution and regulation of aromatase activity in the adult rat brain with a sensitive in vitro assay that measures the amount of 3H2O formed during the conversion of [1 beta-3H]androstenedione to estrone. The rate of aromatase activity in the hypothalamus-preoptic area (HPOA) was linear with time up to 1 h, and with tissue concentrations up to 5 mgeq/200 microliters incubation mixture. The enzyme demonstrated a pH optimum of 7.4 and an apparent Michaelis-Menten constant (Km) of 0.04 microns. We found the greatest amount of aromatase activity in amygdala and HPOA from intact male rats. The hippocampus, midbrain tegmentum, cerebral cortex, cerebellum, and anterior pituitary all contained negligible enzymatic activity. Castration produced a significant decrease in aromatase activity in the HPOA (P less than 0.001), but not in the amygdala or cerebral cortex (P greater than 0.05). The HPOAs of male rats contained significantly greater aromatase activity than the HPOAs of female rats. In females, this enzyme activity did not change during the estrous cycle or after ovariectomy. Administration of testosterone to gonadectomized male and female rats significantly enhanced HPOA aromatase activities (P less than 0.05) to levels approximating those found in HPOA from intact males. Therefore, our results suggest that testosterone, or one of its metabolites, is a major steroidal regulator of HPOA aromatase activity in rats.