Peptides ranging in size from a mean number of 30 residues down to dipeptides supported growth of a leucine auxotroph when used as both a nitrogen and leucine source. Under nitrogen-limiting conditions, the peptides induced extracellular peptidohydrolytic activity, hydrolyzing peptides to monomer amino acids. Growth of a leu-2 mutant of Neurospora crassa on those peptides transportable by the oligopeptide transport system did not result in induction of hydrolytic activity, whereas growth of a leu-2; gltR mutant on these same peptides resulted in induction of peptidohydrolytic activity. The induced extracellular proteolytic activity was shown to be analogous to that inducible by growth on proteins, e.g., bovine serum albumin.