The EL-4 thymoma cell line contains a peptidase which converts beta-endorphin to beta-endorphin 1-17 (gamma-endorphin), beta-endorphin 1-18, and their corresponding C-terminal fragments. This enzyme was purified approximately 700-fold to a single band on an SDS-polyacrylamide gel (106 kDa) in 16% yield. Estimation of the native molecular weight by molecular sieve chromatography gave a value of approximately 220 kDa, indicating that this enzyme is a dimer. Peptide sequencing demonstrated this activity can be attributed to insulin degrading enzyme, a previously described member of the inverzincin family (Hooper, 1994). Kinetic studies with a number of peptide substrates indicate that the enzyme preferentially cleaves on the amino side of hydrophobic or basic residues. However, the substrate specificity is more complex since not all basic and hydrophobic residues in a peptide are cleaved. The enzyme exhibits a requirement for a P'2 residue. On the basis of kcat/K(m) values, insulin, growth hormone releasing factor, and beta-endorphin are nearly equivalent substrates for the enzyme; however, growth hormone releasing factor and beta-endorphin exhibit a 40-fold higher kcat, but a 10-fold decreased affinity relative to insulin. A role for insulin-degrading enzyme as both a beta-endorphin-processing and -inactivating enzyme is implicated from these studies.