Angiotensin-converting enzyme 2 (ACE2), a homologue of ACE, represents a new and potentially important target in cardio-renal disease. A model of the active site of ACE2, based on the crystal structure of testicular ACE, has been developed and indicates that the catalytic mechanism of ACE2 resembles that of ACE. Structural differences exist between the active site of ACE (dipeptidyl carboxypeptidase) and ACE2 (carboxypeptidase) that are responsible for the differences in specificity. The main differences occur in the ligand-binding pockets, particularly at the S2' subsite and in the binding of the peptide carboxy-terminus. The model explains why the classical ACE inhibitor lisinopril is unable to bind to ACE2. On the basis of the ability of ACE2 to cleave a variety of biologically active peptides, a consensus sequence of Pro-X-Pro-hydrophobic/basic for the protease specificity of ACE2 has been defined that is supported by the ACE2 model. The dipeptide, Pro-Phe, completely inhibits ACE2 activity at 180 microM with angiotensin II as the substrate. As with ACE, the chloride dependence of ACE2 is substrate-specific such that the hydrolysis of angiotensin I and the synthetic peptide substrate, Mca-APK(Dnp), are activated in the presence of chloride ions, whereas the cleavage of angiotensin II is inhibited. The ACE2 model is also suggestive of a possible mechanism for chloride activation. The structural insights provided by these analyses for the differences in inhibition pattern and substrate specificity among ACE and its homologue ACE2 and for the chloride dependence of ACE/ACE2 activity are valuable in understanding the function and regulation of ACE2.