Involved in oxidative stress response and redox homeostasis. Functions as a sensor and transducer of hydroperoxide stress. In response to hydroperoxide stress it oxidizes (activates) the transcription activator CAP1, which is involved in transcription activation of genes of the oxidative stress response pathway (PubMed:23706023). May also play a direct role in hydroperoxide scavenging. The enzyme is not required for the glutaredoxin-mediated antioxidant function. In the presence of peroxides, GPX3 is directly oxidized at Cys-43 to form a cysteine sulfenic acid (-SOH). Cys-43-SOH then forms either an intramolecular disulfide bond (Cys-43 with Cys-89) or a transient, intermolecular disulfide bond with 'Cys-446' of CAP1, which is further resolved into a CAP1 intramolecular disulfide bond ('Cys-303' with 'Cys-598'), which causes its nuclear accumulation and activation, and a reduced Cys-43 in GPX3 (By similarity). Required for C.albicans-mediated macrophage killing (PubMed:23706023). [thioredoxin]-dithiol + a hydroperoxide = [thioredoxin]-disulfide + an alcohol + H2O Interacts with CAP1 and probably YBP1. Sensitive to hydrogen peroxide. Unable to filament and thus, escape from murine macrophages after phagocytosis. Also displays defective virulence in the Galleria mellonella infection model. The active site is a conserved redox-active cysteine residue, the peroxidatic cysteine (C(P)), which makes the nucleophilic attack on the peroxide substrate. The peroxide oxidizes the C(P)-SH to cysteine sulfenic acid (C(P)-SOH), which then reacts with another cysteine residue, the resolving cysteine (C(R)), to form a disulfide bridge. The disulfide is subsequently reduced by an appropriate electron donor to complete the catalytic cycle. In this atypical 2-Cys peroxiredoxin, C(R) is present in the same subunit to form an intramolecular disulfide. Belongs to the glutathione peroxidase family.