Endoproteolytic processing of the 26-kDa protein precursor prodynorphin (proDyn) at paired and single basic residues is most likely carried out by the proprotein convertases (PCs); however, the role of PCs at single basic residues is unclear. In previous studies we showed that limited proDyn processing by PC1/PC3 at both paired and single basic residues resulted in the formation of 8- and 10-kDa intermediates. Because PC2 is colocalized with proDyn, we examined the potential role of this convertase in cleaving proDyn. PC2 cleaved proDyn to produce dynorphin (Dyn) A 1-17, Dyn B 1-13, and alpha-neo-endorphin, without a previous requirement for PC1/PC3. PC2 also cleaved at single basic residues, resulting in the formation of the C-peptide and Dyn A 1-8. Only PC2, but not furin or PC1/PC3, could cleave the Arg-Pro bond to yield Dyn 1-8. Structure-activity studies with Dyn A 1-17 showed that a P4 Arg residue is important for single basic cleavage by PC2 and that the P1' Pro residue impedes processing. Conversion of Dyn A 1-17 or Dyn B 1-13 into leucine-enkephalin (Leu-Enk) by PC2 was never observed; however, Dyn AB 1-32 cleavage yielded small amounts of Leu-Enk, suggesting that Leu-Enk can be generated from the proDyn precursor only through a specific pathway. Finally, PC2 cleavages at single and paired basic residues were enhanced when carried out in the presence of carboxypeptidase (CP) E. Enhancement was blocked by GEMSA, a specific inhibitor of CPE activity, and could be duplicated by other carboxypeptidases, including CPD, CPB, or CPM. Our data suggest that carboxypeptidase activity enhances PC2 processing by the elimination of product inhibition caused by basic residue-extended peptides.