Neutral endopeptidase 24.11 contains an active site arginine believed to function in substrate binding. This arginine is thought to form an ionic interaction with the COOH-terminal carboxylate of NEP substrates. The functionality of arginine 102 has been investigated by using site-directed mutagenesis to produce mutants in which this residue was converted to a lysine, glycine, glutamine, or glutamate. All of the mutants exhibited essentially full activity as determined with a synthetic peptide amide, glutaryl-Ala-Ala-Phe-4-methoxy-2-naphthylamide. In contrast, activity was detected only with the wild-type enzyme and the lysine mutant using a synthetic substrate containing a free COOH-terminal carboxylate, dansyl-Gly-Trp-Gly. Inhibition studies with the physiologically active peptide substrates substance P, endothelin, and angiotensin I, as well as substance P free acid, [D-Ala2,Leu5]enkephalin, and [D-Ala2,Leu5]enkephalinamide indicated a lack of importance of arginine 102 in substrate binding. With [D-Ala2,Met5]enkephalin and the chemotactic peptide, N-formyl-Met-Leu-Phe, a significant decrease in affinity is observed with the arginine 102 mutants. These results suggest that the contribution of arginine 102 to substrate binding is dependent upon the strength of other subsite interactions. Examination of dipeptides as inhibitors indicates that the nature and orientation of the P'2 residue is important in determining the strength of the interaction of arginine 102 with its substrates.