ANG converting enzyme (ACE) 2 (ACE2) is a homologue of ACE, which is not blocked by conventional ACE inhibitors. ACE2 converts ANG 1-10 (ANG I) to ANG 1-9, which can be hydrolyzed by ACE to form the biologically active peptide ANG 1-7. ACE2 is expressed in the kidney, but its precise intrarenal localization is unclear, and the role of intrarenal ACE2 in the production of ANG 1-7 is unknown. The present studies determined the relative distribution of ACE2 in the rat kidney and defined its role in the generation of ANG 1-7 in proximal tubule. In microdissected rat nephron segments, semiquantitative RT-PCR revealed that ACE2 mRNA was widely expressed, with relatively high levels in proximal straight tubule (PST). Immunohistochemistry demonstrated ACE2 protein in tubular segments, glomeruli, and endothelial cells. Utilizing mass spectrometry, incubation of isolated PSTs with ANG I (10(-6) M) led to generation of ANG 1-7 (sensitivity of detection > 1 x 10(-9) M), accompanied by the formation of ANG 1-8 (ANG II) and ANG 1-9. The ACE2 inhibitor DX600 completely blocked ANG I-mediated generation of ANG 1-7. Incubation of PSTs with ANG 1-9 also led to generation of ANG 1-7, an effect blocked by the ACE inhibitor captopril or enalaprilat, but not by DX600. Incubation of PSTs with ANG II or luminal perfusion of ANG II did not result in detection of ANG 1-7. The results indicate that ACE2 is widely expressed in rat nephron segments and contributes to the production of ANG 1-7 from ANG I in PST. ANG II may not be a major substrate for ACE2 in isolated PST. The data suggest that ACE2-mediated production of ANG 1-7 represents an important component of the proximal tubular renin-ANG system.