1. A latent neutral proteinase was found in culture media of mouse bone explants. Its accumulation during the cultures is closely parallel to that of procollagenase; both require the presence of heparin in the media. 2. Latent neutral proteinase was activated by several treatments of the media known to activate procollagenase, such as limited proteolysis by trypsin, chymotrypsin, plasmin or kallikrein, dialysis against 3 M-NaSCN at 4 degrees C and prolonged preincubation at 25 degrees C. Its activation often followed that of the procollagenase present in the same media. 3. Activation of neutral proteinase (as does that of procollagenase) by trypsin or plasmin involved two successive steps: the activation of a latent endogenous activator present in the media followed by the activation of neutral proteinase itself by that activator. 4. The proteinase degrades cartilage proteoglycans, denatured collagen (Azocoll) and casein at neutral pH; it is inhibited by EDTA, cysteine or serum. Collagenase is not inhibited by casein or Azocoll and is less resistant to heat or to trypsin than is the proteinase. Partial separation of the two enzymes was achieved by gel filtration of the media but not by fractional (NH4)2SO4 precipitation, by ion exchange or by affinity chromatography on Sepharose-collagen. These fractionations did not activate latent enzymes. 5. Trypsin activation decreases the molecular weight of both latent enzymes (60 000-70 000) by 20 000-30 000, as determined by gel filtration of media after removal of heparin. 6. The latency of both enzymes could be due either to a zymogen or to an enzyme-inhibitor complex. A thermostable inhibitor of both enzymes was found in some media. However, combinations of either enzyme with that inhibitor were not reactivated by trypsin, indicating that this inhibitor is unlikely to be the cause of the latency.