Dendritic cells and human B cell lines were compared for ability to present synthetic peptides corresponding to residues 145–159 and 188–203 of human Ig κ-chains to peptide-specific mouse T cell hybridomas restricted by HLA-DR4Dw4. B cell lines presented both peptides, but dendritic cells could only efficiently present the latter epitope. In this paper, we show that dendritic cells degrade the 145–159 peptide, removing four residues from the amino terminus. Binding of the peptide to the class II restriction element is not required for this process. The degradation product is resistant to further cleavage, accumulates in the culture supernatant, and does not bind to HLA-DR4Dw4 or stimulate T cell reactivity. Cleavage can be blocked with bestatin, but not with other protease inhibitors tested, or by a mAb directed against aminopeptidase N (CD13). Addition of an acetyl group to the amino terminus of peptide 145–159 also blocks degradation, and allows dendritic cells to present the peptide to specific T cells with greatly increased efficiency. These results demonstrate that CD13 on dendritic cells is able to selectively and efficiently degrade exogenously provided peptide Ags, in a process that can be blocked by addition of an acetyl group to the amino terminus of the peptide. Modification of the amino terminus of peptide epitopes susceptible to degradation may prove to be useful as a general strategy for enhancing their immunogenicity.