pep4 mutants of Saccharomyces cerevisiae accumulate inactive precursors of vacuolar hydrolases. The PEP4 gene was isolated from a genomic DNA library by complementation of the pep4-3 mutation. Deletion analysis localized the complementing activity to a 1.5-kilobase pair EcoRI-XhoI restriction enzyme fragment. This fragment was used to identify an 1,800-nucleotide mRNA capable of directing the synthesis of a 44,000-dalton polypeptide. Southern blot analysis of yeast genomic DNA showed that the PEP4 gene is unique; however, several related sequences exist in yeasts. Tetrad analysis and mitotic recombination experiments localized the PEP4 gene proximal to GAL4 on chromosome XVI. Analysis of the DNA sequence indicated that PEP4 encodes a polypeptide with extensive homology to the aspartyl protease family. A comparison of the PEP4 predicted amino acid sequence with the yeast protease A protein sequence revealed that the two genes are, in fact, identical (see also Ammerer et al., Mol. Cell. Biol. 6:2490-2499, 1986). Based on our observations, we propose a model whereby inactive precursor molecules produced from the PEP4 gene self-activate within the yeast vacuole and subsequently activate other vacuolar hydrolases.The vacuole of the yeast Saccharomyces cerevisiae is a major cellular repository for amino acids, purines, and polyphosphates and contains a number of the major hydrolases of the cell, including protease A (PRA), protease B (PRB), carboxypeptidase Y (CPY), the large aminopeptidase, the repressible alkaline phosphatase, and at least one RNase species (44,62,63). Most, if not all, of the vacuolar hydrolases are glycoproteins and are synthesized as inactive precursors (see reference 29 for a review). Precursors to vacuolar hydrolases share a part of the secretion pathway used by externally secreted proteins, passing through the endoplasmic reticulum and Golgi membranes before being sorted from secretory proteins along a route that leads to the vacuole (59). Unlike external invertase (13), the signal sequence from CPY does not appear to be removed upon transport into the endoplasmic reticulum (12). In kinetic experiments, two precursors each for mature CPY and PRA have been detected. These two precursors are each larger than the corresponding mature enzyme species, differ from one another in the composition of their carbohydrate side chains, and correspond in size to species found in the endoplasmic reticulum (pl) and Golgi membranes (p2) (46,59,67). Similarly, a single precursor to PRB, which is larger than the mature enzyme, has also been detected (41,42). The final step in maturation of these hydrolases, which is known to occur very late in the processing pathway and possibly in the vacuole itself, involves removal of a peptide fragment that is known to be at the N terminus in the case of CPY (18,20,41). This proteolytic scission fails to occur in pep4 mutants (20,42,67) inactive, we previously suggested that PEP4 encodes a vacuolar hydrolase maturase that is required for activation.We describe here the isola...