The endogenous neuropeptide N-acetyl-L-aspartyl-L-glutamate (NAAG) fulfills several criteria required to be accepted as a neurotransmitter. NAAG inactivation may proceed through enzymatic hydrolysis into N-acetyl-L-aspartate and glutamate by an N-acetylated-alpha-linked acidic dipeptidase (NAALADase). Therefore, some properties of NAALADase activity were investigated using crude membranes from the rat forebrain. Kinetic parameters of the hydrolysis of [Glu-3H]NAAG were determined first (Km = 0.40 +/- 0.05 microM; Vmax = 155 +/- 20 pmol/min/mg of protein). The enzymatic activity, i.e., NAALADase, was inhibited noncompetitively by the glutamatergic agonist quisqualate (Ki = 1.9 +/- 0.3 microM), and competitively by N-acetyl-L-aspartyl-beta-linked L-glutamate (beta-NAAG; Ki = 0.70 +/- 0.05 microM). To determine whether glutamate-containing dipeptides, such as NAAG, beta-NAAG, N-acetyl-L-aspartyl-D-glutamate, L-aspartyl-L-glutamate, L-alanyl-L-glutamate, L-glutamyl-L-glutamate, and L-glutamyl-gamma-linked L-glutamate, were substrates of NAALADase, rat brain membranes were immobilized on a C-8 column. Thus, endogenous trapped glutamate was washed away and formation of unlabelled glutamate could be estimated using an o-phthaldialdehyde/reverse-phase HPLC detection procedure. beta-NAAG was shown to be a nonhydrolyzable competitive inhibitor of NAALADase. L-Aspartyl-L-glutamate was hydrolyzed faster than NAAG, suggesting that the acetylated moiety is not essential for NAALADase specificity. Rat brain membranes also contained nonspecific peptidase activities (insensitive to both quisqualate and beta-NAAG), which, in the case of L-alanyl-L-glutamate, for instance, accounted for all observed hydrolysis.