N-Arachidonoylethanolamine (anandamide) is cannabimimetic, and N-palmitoylethanolamine is anti-inflammatory and immunosuppressive. We found an amidase that is more active with the latter than the former in contrast to the previously known anandamide amidohydrolase for which N-palmitoylethanolamine is a poor substrate. Proteins solubilized by freezing and thawing from the 12,000 ؋ g pellet of various rat organs hydrolyzed [ 14 C]N-palmitoylethanolamine to palmitic acid and ethanolamine. The specific enzyme activity was higher in the order of lung > spleen > small intestine > thymus > cecum, and high activity was found in peritoneal and alveolar macrophages. The enzyme with a molecular mass of 31 kDa was purified from rat lung to a specific activity of 1.8 mol/min/mg protein. Relative reactivities of the enzyme with various N-acylethanolamines (100 M) were as follows: N-palmitoylethanolamine, 100%; N-myristoylethanolamine, 48%; N-stearoylethanolamine, 21%; N-oleoylethanolamine, 20%; N-linoleoylethanolamine, 13%; anandamide, 8%. The enzyme was the most active at pH 5 and was activated 7-fold by Triton X-100. The enzyme was almost insensitive to methyl arachidonyl fluorophosphonate, which inhibited anandamide amidohydrolase potently. Thus, the new enzyme referred to as N-palmitoylethanolamine hydrolase was clearly distinguishable from anandamide amidohydrolase.