A single enzyme found in both Drosophila and mammalian cells is able to selectively bind and degrade transforming growth factor (TGF)-alpha and insulin, but not EGF, at physiological concentrations. These growth factors are also able to inhibit binding and degradation of one another by the enzyme. Although there are significant immunological differences between the mammalian and Drosophila enzymes, the substrate specificity has been highly conserved. These results demonstrate the existence of a selective TGF-alpha-degrading enzyme in both Drosophila and mammalian cells. The evolutionary conservation of the ability to degrade both insulin and TGF-alpha suggests that this property is important for the physiological role of the enzyme and its potential for regulating growth factor levels.