During the intoxication process, Pseudomonas exotoxin (PE) and immunotoxins containing PE internalize into the target cell and become processed into two fragments, and the carboxyl fragment translocates into the cytosol where it inactivates elongation factor 2. We have proposed that after internalization into cells the carboxyl-terminal fragment of PE (amino acids 280-613), which ends in REDLK, binds to the KDEL receptor (ERD2) which carries it to the endoplasmic reticulum, from which the PE fragment translocates to the cytosol. Earlier experiments showing that REDL but not REDLK binds to the KDEL receptor suggested that the terminal lysine is removed sometime during the intoxication process. To determine if and where this occurs, we exposed a peptide ending in REDLK to malignant cells in culture and found that binding to the KDEL receptor was restored. Restoration of receptor binding also occurred if a peptide or toxin ending in REDLK at its carboxyl terminus was incubated with plasma, indicating that the terminal lysine is removed prior to entry of the toxin into the cell. We conclude that plasma carboxypeptidase(s) cleave(s) the lysine residue from the carboxyl terminus of PE and PE-containing immunotoxins as an early and essential step in their cellular intoxication pathway.