Arachidonoylethanolamide or 'anandamide' is a naturally occurring derivative of arachidonic acid that has been shown to activate cannabinoid receptors in the brain. Its metabolic inactivation by brain tissue has been investigated. Anandamide is hydrolyzed by the membrane fraction of rat brain homogenate to arachidonic acid and ethanolamine. The hydrolysis is temperature and pH- dependent (pH maximum at 8.5) and abolished by boiling. Anandamide hydrolysis is protein dependent in the range of 25-100 micrograms protein/ml; does not require calcium and is inhibited by phenylmethylsulfonylfluoride, diisopropylfluorophosphate, thimerosal and arachidonic acid. Hydrolysis of 10 microM anandamide by brain membranes follows first order kinetics; at 30 degrees C, the rate constant for anandamide catabolism is 0.34 min-1 mg protein-1. The Km for anandamide hydrolysis is 3.4 microM, and the Vmax is 2.2 nmol/min per mg protein. Hydrolysis occurs in all subcellular fractions except cytosol with the highest specific activity in myelin and microsomes. The distribution of anandamide hydrolytic activity correlates with the distribution of cannabinoid receptor-binding sites; the hippocampus, cerebellum and cerebral cortex exhibit the highest metabolic activity, while activity is lowest in the striatum, brain stem and white matter.