Incubation of beta-endorphin with cytosolic and particulate fractions of rat brain resulted in the formation of several peptides, including gamma-endorphin [beta-endorphin-(1-17)] and beta-endorphin-(18-31), indicating the presence of enzyme activity cleaving the Leu17-Phe18 bond of beta-endorphin. An assay for this Leu-Phe cleaving activity, based on the cleavage of the 14C-labeled substrate acetyl-Val-Thr-Leu-Phe-[epsilon-([14C]CH3)2]Lys-NHCH3, was used to examine the properties of this enzyme activity. beta-Endorphin-(1-31) competitively inhibited the Leu-Phe-cleaving enzyme activity on the pentapeptide substrate. Over 90% of activity was recovered in the cytosolic fraction. Leu-Phe-cleaving activity behaved like a thiol endopeptidase because it was inhibited by low concentrations of N-ethylmaleimide, p-chloromercuribenzoate, p-chloromercuribenzoyl sulfate, and low concentrations of Hg2+. Low concentrations of sulfhydryl compounds stimulated Leu-Phe-cleaving activity. The activity was optimal between pH 8.5 and 9.0. The Km of Leu-Phe-cleaving activity in the cytosolic fraction was 35 microM and in the particulate fraction 88 microM with Vmax values of 193 and 15 nmol mg protein-1 h-1, respectively. The apparent molecular mass of the Leu-Phe-cleaving enzyme was estimated by gel filtration to be approximately 200 kilodaltons. These properties of Leu-Phe-cleaving activity indicate that the Leu-Phe-cleaving enzyme is distinct from any known brain endopeptidase.