In order to gain insight into the mechanisms that determine the selectivity of the ubiquitin proteolytic pathway, the protein substrate binding site of the ubiquitin-protein ligase system was identified and examined. Previous studies had shown that the ligase system consists of three components: a ubiquitin-activating enzyme (E1), ubiquitin-carrier protein (E2), and a third enzyme, E3, the mode of action of which has not been defined. E3 from rabbit reticulocytes was further purified by a combination of affinity chromatography, hydrophobic chromatography, and gel filtration procedures. A 180-kDa protein was identified as the subunit of E3. Two independent methods indicate that E3 has the protein binding site of the ubiquitin ligase system. These are the chemical cross-linking of 125I-labeled proteins to the E3 subunit and the functional conversion of enzyme-bound labeled proteins to ubiquitin conjugates in pulse-chase experiments. The trapping of E3-bound protein for labeled product formation was allowed by the slow dissociation of E3 X protein complex. The specificity of binding of different proteins to E3, examined by both methods, showed a direct correlation with their susceptibility to degradation by the ubiquitin system. Proteins with free alpha-NH2 groups, which are good substrates, bind better to E3 than corresponding proteins with blocked NH2 termini, which are not substrates. Oxidation of methionine residues to sulfoxide derivatives greatly increases the susceptibility of some proteins to ligation with ubiquitin, with a corresponding increase in their binding to E3. However, a protein derivative which was subjected to both amino group modification and oxidation binds strongly to the enzyme, even though it cannot be ligated to ubiquitin. It thus seems that the substrate binding site of E3 participates in determining the specificity of proteins that enter the ubiquitin pathway of protein degradation.