Rat liver perchloric acid-soluble protein (L-PSP) is a potent inhibitor of cell-free protein synthesis; however, its mechanism of action is not known. Here we show that the protein is a unique ribonuclease and that this activity is responsible for the inhibition of translation. The addition of perchloric acid-soluble protein to a rabbit reticulocyte cell-free system at a concentration of 6.2 microM led to an almost complete inhibition of protein synthesis. The kinetics are unlike those of hemin-controlled inhibitor, a protein that acts at the initiation step. The inhibition appears to be due to an endoribonucleolytic activity of perchloric acid-soluble protein because L-PSP directly affects mRNA template activity and induces disaggregation of the reticulocyte polysomes into 80 S ribosomes, even in the presence of cycloheximide. These effects were observed with authentic as well as recombinant L-PSP. Analysis by thin-layer chromatography of [alpha-32P]UTP-labeled mRNA incubated with the protein showed production of the ribonucleoside 3'-monophosphates Ap, Gp, Up, and Cp, providing direct evidence that the protein is an endoribonuclease. When either 5'- or 3'-32P-labeled 5 S rRNA was the substrate, L-PSP cleaved phosphodiester bonds only in the single-stranded regions of the molecule.