A genomic clone encoding the protease (Pr) and the assembly protein (AP) of Kaposi's sarcoma-associated herpesvirus (KSHV) (also called human herpesvirus 8) has been isolated and sequenced. As with other herpesviruses, the Pr and AP coding regions are present within a single long open reading frame. The mature KSHV Pr and AP polypeptides are predicted to contain 230 and 283 residues, respectively. The amino acid sequence of KSHV Pr has 56% identity with that of herpesvirus salmiri, the most similar virus by phylogenetic comparison. Pr is expressed in infected human cells as a late viral gene product, as suggested by RNA analysis of KSHV-infected BCBL-1 cells. Expression of the Pr domain in Escherichia coli yields an enzymatically active species, as determined by cleavage of synthetic peptide substrates, while an active-site mutant of this same domain yields minimal proteolytic activity. Sequence comparisons with human cytomegalovirus (HCMV) Pr permitted the identification of the catalytic residues, Ser114, His46, and His134, based on the known structure of the HCMV enzyme. The amino acid sequences of the release site of KSHV Pr (Tyr-Leu-Lys-Ala*Ser-Leu-Ile-Pro) and the maturation site (Arg-Leu-Glu-Ala*Ser-Ser-Arg-Ser) show that the extended substrate binding pocket differs from that of other members of the family. The conservation of amino acids known to be involved in the dimer interface region of HCMV Pr suggests that KSHV Pr assembles in a similar fashion. These features of the viral protease provide opportunities to develop specific inhibitors of its enzymatic activity.