The C-terminal amide structure of peptide hormones and neurotransmitters is synthesized via a two-step reaction catalyzed by peptidylglycine alpha-hydroxylating monooxygenase (PHM) and peptidylhydroxyglycine N-C lyase. A Xenopus laevis PHM expressed in insect-cell culture by the baculovirus-expression-vector system was purified to homogeneity and characterized. Using a newly established assay system for PHM, the kinetic features of this enzyme were investigated. As expected, the enzyme required copper ions, L-ascorbate and molecular oxygen for turnover. Salts like KI and KCl, and catalase stabilized the enzyme in the presence of L-ascorbate. The optimum pH value for the enzyme reaction was around six when Mes buffer was used and around seven when phosphate buffer was used under the same assay condition. Below pH 6, acetate, iodide and chloride ions activated the reaction. The kinetic analysis is consistent with a ping-pong mechanism with respect to peptide and L-ascorbate, and the peptide showed substrate inhibition. The substrate specificity of the enzyme at the penultimate position was examined by competitive assay using tripeptides with glycine at the C-termini and the inhibitory potency of these peptides in descending order was methionine > aromatic > non-polar amino acids.