Neutral endopeptidase (NEP) is a cell-surface peptidase normally expressed by prostate epithelial cells and lost in ~50% of primary prostate cancers. NEP directly associates with multiple proteins at the cell surface including Ezrin/Radixin/Moesin (ERM) proteins and the PTEN tumor suppressor protein. Analysis of the N-terminal sequence of the NEP cytosolic domain (N-terminal MGKSESQMDI TDINTPKPKK KQRWTR) identified a myristoylation consensus site. Mutation of Gly-2 to Arg significantly decreased (3)H-myristoylation activity, and correlated with translocation of NEP from the plasma membrane to a perinuclear domain as demonstrated by immunofluorescence staining and Western blotting with an NEP-specific antibody. Removal of this myristoylation residue did not affect NEP enzymatic specific activity. Myristoylated NEP recruited more PTEN protein to the cell membrane fraction than unmyristoylated NEP. These data demonstrate that NEP is myristoylated at Gly-2 and that this modification is an intrinsic signal for membrane targeting.