To test the hypothesis that proteolysis is required for anterograde-retrograde (A-R) conversion of membranous organelles at axon tips, a new experimental paradigm was developed. By cutting the sciatic nerves of rats, a concentrated population of axon tips was produced, and proteases in the axon tips were locally inhibited by immersing the cut end of the nerve into a solution containing protease inhibitors (E-64 or leupeptin). Membranous organelles were pulse-labeled with [3H]leucine at the nerve cell body, and the amount of retrogradely transported radiolabeled vesicles from the axon tips was quantified with a proximal collection ligature. The results show that protease inhibition decreased the amount of radioactivity that was transported retrogradely from the axon tips and correspondingly increased the amount that remained in the tips. Ultrastructural analyses showed that the protease-inhibited axon tips were greatly distended by 40-80 nm membranous tubules. By contrast, the control axon tips had relatively few of these membranous tubules. These results show that protease inhibition at the axon tip blocks the removal of membranous elements from the axon tips by retrograde transport. We propose that proteolysis is an A-R converting mechanism which is critically required at the axon tip for the conversion of 40-80 nm membranous tubules into retrograde organelles. Apparently, the 40-80 nm membranous tubules are normally transient intermediates in the A-R conversion pathway, and they rapidly accumulate in the axon tip if the mechanisms that convert them into retrograde organelles are blocked. These 40-80 nm tubules also accumulate in certain pathologies and in the aging process.(ABSTRACT TRUNCATED AT 250 WORDS)