Gene targeting in mice was used to investigate the unknown function of Scp2, encoding sterol carrier protein-2 (SCP2; a peroxisomal lipid carrier) and sterol carrier protein-x (SCPx; a fusion protein between SCP2 and a peroxisomal thiolase). Complete deficiency of SCP2 and SCPx was associated with marked alterations in gene expression, peroxisome proliferation, hypolipidemia, impaired body weight control, and neuropathy. Along with these abnormalities, catabolism of methyl-branched fatty acyl CoAs was impaired. The defect became evident from up to 10-fold accumulation of the tetramethyl-branched fatty acid phytanic acid in Scp2(-/-) mice. Further characterization supported that the gene disruption led to inefficient import of phytanoyl-CoA into peroxisomes and to defective thiolytic cleavage of 3-ketopristanoyl-CoA. These results corresponded to high-affinity binding of phytanoyl-CoA to the recombinant rat SCP2 protein, as well as high 3-ketopristanoyl-CoA thiolase activity of the recombinant rat SCPx protein.