Radioactive alpha factor is degraded to discrete biologically inactive fragments by the target a cells of S. cerevisiae, but not by alpha cells which make the pheromone. The pattern of cleavage products and sequence analysis of one fragment indicated that the first scission occurred between leucine 6 and lysine 7. The protease inhibitors tosyl-L-argininyl-methyl ester (TAME), tosyl-L-lysyl-chloromethylketone (TLCK) and N-acetyl-L-leucyl-L-leucyl-L-argininal (leupeptin) markedly prolonged the period of G1 arrest in a cells exposed to alpha factor, while other standard protease inhibitors had little or no effect. The presence of TAME and leupeptin, or TLCK, reduced the rate of degradation of radioactively labeled alpha factor by a cells. Intact yeast cells have apparent esterase and amidase activities that are blocked by the same spectrum of inhibitors that potentiate alpha factor action. Purified alpha factor is a competitive inhibitor of these hydrolytic activities. The activities are present in yeast mutants which have greatly reduced levels of the three major vacuole-associated proteases (A, B and C) or which carry an ochre mutation in the major neutral protease (B). These observations indicate that the inactivation of alpha factor is due to endoproteolytic cleavage, the destruction of the pheromone is required to overcome its effects on growth and that degradation of the molecule may involve surface bound endopeptidase(s).