Carboxypeptidase E appears to be involved in the biosynthesis of a wide range of peptide hormones and neurotransmitters. The evidence for this is: (a) CPE is present in tissues that produce bioactive peptides; (b) in tissues that have been subjected to subcellular fractionation, the CPE activity is associated with peptide-containing secretory granules; (c) CPE is able to remove C-terminal basic amino acids from a variety of synthetic peptides without further hydrolyzing the peptide; (d) CPE is active at pH 5.6, the internal pH of secretory granules. The CPE activities in various tissues have similar physical and enzymatic properties. Two forms of CPE, soluble and membrane-bound, are present in most tissues with CPE activity. These two forms differ slightly in molecular weight, but have identical enzymatic properties. Both forms arise from the same precursor, which is encoded by a single gene. This gene is a member of a carboxypeptidase gene family that includes CPA and CPB. At the amino acid level, CPE has approximately 20% homology with bovine CPA and 17% homology with bovine CPB. All of the amino acids in CPA and CPB that are thought to be essential for catalytic activity are present in CPE in comparable positions. The homology of CPE with CPA and CPB suggests a common evolutionary origin for the three enzymes. This relationship fits with the theory that certain peptide hormones may have evolved from serine proteases. Further studies are needed to investigate the processing of proCPE into CPE, and the regulation of CPE activity. While there is some evidence that CPE may be regulated, it does not appear that regulation of CPE activity plays an important role in controlling peptide biosynthesis. However, further studies are necessary before this possibility can be eliminated.