Iodothyronine deiodinases are selenocysteine-containing enzymes that activate or inactivate thyroid hormones (THs). Deiodinase type 2 (Dio2) catalyzes the conversion of the prohormone T4 into the transcriptionally active T3 and is the predominant activating deiodinase in zebrafish. Using zinc finger nucleases, we generated two different dio2−/− mutant zebrafish lines to investigate the physiological function of this TH activator. The first line contains a deletion of 9 bp, resulting in an in-frame elimination of three conserved amino acids. The other line is characterized by an insertion of 4 bp, leading to the introduction of a premature stop-codon. Both lines completely lack Dio2 activity, resulting in a strong reduction of T3 abundancy in all tissues tested. Early development is clearly perturbed in these animals, as shown by a diverse set of morphometric parameters, defects in swim bladder inflation, and disturbed locomotor activity tested between 1 and 7 days after fertilization. Permanent Dio2 deficiency also provokes long-term effects because growth and especially fertility are severely hampered. Possible compensatory mechanisms were investigated in adult dio2−/− mutants, revealing a down-regulation of the inactivating deiodinase Dio3 and TH receptor transcript levels. As the first nonmammalian model with permanent Dio2 deficiency, these mutant zebrafish lines provide evidence that Dio2 is essential to assure normal development and to obtain a normal adult phenotype.