Previous studies have indicated that at least part of the selection of proteins for degradation takes place at a binding site on ubiquitin-protein ligase, to which the protein substrate is bound prior to ligation to ubiquitin. It was also shown that proteins with free NH2-terminal alpha-NH2 groups bind better to this site than proteins with blocked NH2 termini (Hershko, A., Heller, H., Eytan, E., and Reiss, Y. (1986) J. Biol. Chem. 261, 11992-11999). In the present study, we used simple derivatives of amino acids, such as methyl esters, hydroxamates, or dipeptides, to examine the question of whether the protein binding site of the ligase is able to distinguish between different NH2-terminal residues of proteins. Based on specific patterns of inhibition of the binding to ligase by these derivatives, three types of protein substrates could be distinguished. Type I substrates are proteins that have a basic NH2-terminal residue (such as ribonuclease and lysozyme); these are specifically inhibited by derivatives of the 3 basic amino acids (His, Arg, and Lys) with respect to degradation, ligation to ubiquitin, and binding to ligase. Type II substrates (such as beta-lactoglobulin or pepsinogen, that have a Leu residue at the NH2 terminus) are not affected by the above compounds, but are specifically inhibited by derivatives of bulky hydrophobic amino acids (Leu, Trp, Phe, and Tyr). In these cases, the amino acid derivatives apparently act as specific inhibitors of the binding of the NH2-terminal residue of proteins, as indicated by the following observations: (a) derivatives in which the alpha-NH2 group is blocked were inactive and (b) in dipeptides, the inhibitory amino acid residue had to be at the NH2-terminal position. An additional class (Type III) of substrates comprises proteins that have neither basic nor bulky hydrophobic NH2-terminal amino acid residues; the binding of these proteins is not inhibited by homologous amino acid derivatives that have NH2-terminal residues similar to that of the protein. It is concluded that Type I and Type II proteins bind to distinct and separate subsites of the ligase, specific for basic or bulky hydrophobic NH2-terminal residues, respectively. On the other hand, Type III proteins apparently predominantly interact with the ligase at regions of the protein molecule other than the NH2-terminal residue.