An enzyme which removes tripeptides from the free, NH2-terminal end of oligopeptides has been detected in the extralysosomal fraction of rat liver. The enzyme was partially purified by Sepharose CL-4B and DEAE-cellulose chromatography. The pH optimum was in the neutral range and the apparent native molecular weight was above 10(6), as judged by the Sepharose chromatography. The enzyme cleaved the phosphopeptide Gly-Val-Leu-Arg-Arg-Ala-Ser(P)-Val-Ala (I), first at the Leu-Arg bond and then at the Ala-Ser(P) bond. The cleavage of the former bond was inhibited by Arg-Arg-Ala-Ser(P)-Val-Ala (II), which indicated that both bonds were cleaved by the same enzyme. Km for II was 0.01 mM at pH 6.5-7.5. Val-Leu-Arg-Arg-Ala-Ser(P)-Val-Ala (III) and Leu - Arg - Arg - Ala - Ser(P)-Val-Ala were poor substrates. III was, however, found to be an efficient inhibitor. The Ala-Ser(P) bond of Arg-Arg-Ala-Ser(P)-Val (IV) was cleaved at the same rate as that of II. The enzyme was active also with the unphosphorylated peptides corresponding to II and IV and tolerated the substitution of lysine for the NH2-terminal arginine of the latter peptide. Substitution of guanidovaleric acid for the NH2-terminal arginine of IV and of guanidovaleric acid or epsilon-amino-hexanoic acid for the NH2-terminal arginine of unphosphorylated IV reduced the rate of hydrolysis to insignificant levels, demonstrating the importance of a free NH2 terminus. The results provide evidence of a unique tripeptidyl aminopeptidase.