Biosynthesis of peptide hormones and neurotransmittters involves proteolysis of proprotein precursors by secretory vesicle cathepsin L. Cathepsin L generates peptide intermediates with basic residues at their NH 2 -termini, indicating that Arg/Lys aminopeptidase is needed to generate the smaller biologically active peptide. Therefore, this study identified the Arg/Lys aminopeptidase that is present in secretory vesicles of adrenal medulla and neuroendocrine tissues, achieved by molecular cloning and localization in 'model' neuropeptidecontaining secretory vesicles (bovine). Molecular cloning of the bovine aminopeptidase B (AP-B) cDNA defined its primary sequence that allowed selection of antisera for immunolocalization studies. AP-B was present in secretory vesicles that contain cathepsin L with the neuropeptides enkephalin and neuropeptide Y. The AP-B in several neuroendocrine tissues was detected by western blots. Recombinant bovine AP-B showed preference for Arg-methylcoumarinamide substrate. AP-B was inhibited by arphamenine, an inhibitor of aminopeptidases. Bovine AP-B showed similar activities for Arg-(Met)enkephalin (ME) and Lys-ME neuropeptide substrates to generate ME, while rat AP-B preferred Arg-ME. Furthermore, AP-B possesses an acidic pH optimum of 5.5-6.5 that is similar to the internal pH of secretory vesicles. The significant finding of the secretory vesicle localization of AP-B with neuropeptides and cathepsin L suggests a role for this exopeptidase in the biosynthesis of neuropeptides. Neuropeptides play significant roles for mediating cell-cell communication in neuroendocrine systems as peptide neurotransmitters and hormones. These biologically active peptides are synthesized by proteolytic processing of proprotein precursors in the regulated secretory pathway of neurons and endocrine cells. Processing occurs primarily within secretory vesicles as the major subcellular site for neuropeptide biosynthesis. Mature neuropeptides are stored in such secretory vesicles for controlled secretion.The precursors of endogenous enkephalin and related opioid neuropeptides have been utilized for elucidating protease pathways that participate in the biosynthesis of active neuropeptides. Examination of the major proenkephalin-cleaving activity in enkephalin-containing secretory vesicles purified from adrenal medullary chromaffin cells revealed that the cysteine protease cathepsin L participates in the production of (Met)enkephalin (ME; Yasothornsrikul et al.