Previously we identified an acid protease activity which was located in the endosomes of rabbit alveolar macrophages (Diment, S., and Stahl, P.D. (1985) J. Biol. Chem. 260, 15311-15317). In this study, the endosomal protease is identified as cathepsin D by immunoprecipitation with polyclonal antibodies raised against rabbit cathepsin D and by NH2-terminal sequence. In order to elucidate the mechanism for targeting of cathepsin D to endosomes, we first examined the membrane association of cathepsin D with light (rho = 1.05 g/ml) and heavy density (rho = 1.1 g/ml) vesicles from Percoll density gradients. After sequential washes, 8.4 and 21.9% of cathepsin D activity remained associated with heavy and light density vesicles, respectively. This membrane-associated cathepsin D could not be solubilized in either buffer at pH 5.0 containing mannose 6-phosphate and EDTA or in buffer at pH 10.6. Solubilization required the detergent Triton X-100. To determine whether membrane-associated cathepsin D was found in endosomes, the enzyme was radioiodinated within endosomes and lysosomes with internalized lactoperoxidase. The membrane-associated form was detected in endosomes, but much less in lysosomes. Biosynthetic studies combined with the same extraction procedure revealed that macrophage cathepsin D is first synthesized as an inactive membrane-associated precursor. The precursor is processed to an active, membrane-associated form and then to the active soluble form found in lysosomes. Our studies provide evidence that 1) cathepsin D is in endosomes of macrophages; 2) cathepsin D is transported to endosomes as a membrane-associated form; and 3) the membrane-associated form is a biosynthetic precursor for the soluble form found in endosomes and lysosomes.