A large number of peptide hormones and neurotransmitters are initially synthesized as precursor proteins that require enzymatic processing to give rise to the biologically active peptide (4, 24). In many cases, the bioactive peptide is flanked by pairs of basic amino acids in these precursor proteins. The sequential actions of a trypsinlike endopeptidase and a carboxypeptidase B-like exopeptidase would liberate the peptide from the surrounding se quences. The existence of trypsinlike and carboxypeptidase B-like peptide processing enzymes was originally proposed because limited digestion of proinsulin with these pancreatic enzymes produced insulin (21). However, the specificities of both trypsin and carboxypeptidase B are not appropriate for the production of many peptides; trypsin usually cleaves after every basic amino acid within a peptide, and carboxypeptidase B has a moderate affinity for some non-basic amino acids. The enzyme activities that are involved in the processing of peptide precursors are more selective in their substrate specific ity than these digestive enzymes and are specific for particular sequences within the precursor (1, 10, 11, 18, 23, 24). CPE has been proposed to be the carboxypeptidase B-like enzyme associ ated with the biosynthesis of many peptide neurotransmitters and hormones. Carboxypeptidase E (CPE) is highly specific for C-terminal basic amino acids and has no detectable activity towards other amino acids. This enzyme has been designated EC 3.4. 17.10 and is also known as enkephalin convertase and carboxypeptidase H. While there are several important differences be tween CPE and carboxypeptidase B (CPB), recent studies on CPE have revealed an evolutionary relationship between these enzymes (7) and suggests that the peptide-processing enzymes werc originally digestive enzymes. The low overall homology between CPE and ePB (17%) implies that these