The yeast KEX2 protease is the only enzyme that has a proven role in the activation of polypeptide hormones through cleavage at pairs of basic residues. The enzyme that fulfils this role in higher eukaryotes has yet to be unequivocally identified. In this investigation, a KEX2-like calcium-dependent protease has been identified in rat hepatic microsomes. The enzyme is membrane-bound, has a pH optimum of 5-6 and converts proalbumin to albumin. More importantly, like the KEX2 protease, it meets two other exacting criteria defined by specific mutations in humans. Namely, it does not process proalbumin Christchurch (-1 Arg----Gln) which lacks one of the requisite basic residues and, whilst not itself a serine protease, it is inhibited by the reactive center variant, alpha 1-antitrypsin Pittsburgh (358 Met----Arg) but not by normal alpha 1-antitrypsin.