The robust application of stable mercury (Hg) isotopes for mercury source apportionment and risk assessment necessitates the understanding of mass-dependent fractionation (MDF) due to internal transformations within organisms. Here, we used high energy-resolution XANES spectroscopy and isotope ratios of total mercury (δ202THg) and methylmercury (δ202MeHg) to elucidate the chemical speciation of Hg and the resultant MDF due to internal MeHg demethylation in waterbirds. In three waterbirds (Clark’s grebe, Forster’s tern, south polar skua), between 17-86% of the MeHg was demethylated to inorganic mercury (iHg) species primarily in the liver and kidneys as Hg-tetraselenolate (Hg(Sec)4) and minor Hg-dithiolate (Hg(SR)2) complexes. Tissular differences between δ202THg and δ202MeHg correlated linearly with %iHg (Hg(Sec)4 + Hg(SR)2), and were interpreted to reflect a kinetic isotope effect during in vivo MeHg demethylation. The product-reactant isotopic enrichment factor (εp/r) for the demethylation of MeHg Hg(Sec)4 was −2.2 ± 0.1‰. δ202MeHg values were unvarying within each bird regardless of Hg(Sec)4 abundance, indicating fast internal cycling or replenishment of MeHg relative to demethylation. Our findings document a universal selenium-dependent demethylation reaction in birds, provide new insights on the internal transformations and cycling of MeHg and Hg(Sec)4, and allow for mathematical correction of δ202THg values due to the MeHg Hg(Sec)4 reaction.