At least three enzymes have been identified in atrial tissue homogenates that are capable of processing pro-atrial natriuretic factor to active atrial peptides. The atrial peptides possess potent natriuretic, diuretic, vasorelaxant, and hemodynamic properties, and their existence has implicated the mammalian heart as an endocrine organ. We have purified and characterized a serine proteinase (Mr approximately equal to 70,000) associated with atrial granules that preferentially hydrolyzes the Arg-Ser bond in the synthetic substrates Gly-Pro-Arg-Ser-Leu-Arg, benzoyl-Gly-Pro-Arg-Ser-Leu-Arg, and benzoyl-Gly-Pro-Arg-Ser-Leu-Arg-Arg-2-naphthylamide, the Arg-2-naphthylamide bond in the substrate benzoyl-Gly-Pro-Arg-2-naphthylamide, and the Arg-Ser bond in a 31-residue substrate (Gly96-Tyr126 peptide) corresponding to residues Arg98-Ser99 in pro-atrial natriuretic factor. The Gly96-Tyr126 peptide contains the putative processing site in pro-atrial natriuretic factor and the sequence for the bioactive peptides. Our results indicate that the minimum processing site sequence is -Gly-Pro-Arg-Ser-Leu-Arg-Arg- and that the Ser99-Tyr126 natriuretic peptide is the predominant hydrolytic product. After prolonged incubation or at high enzyme concentrations, the Ser103-Tyr126 natriuretic peptide may also be formed. The Ser103-Arg125 natriuretic peptide was only a very minor product. The doublet of basic amino acids is not the primary processing site in pro-atrial natriuretic factor, but their presence may influence cleavage at the single Arg residue "upstream." Our findings are consistent with the idea that the pro-protein and the processing enzymes are packaged into the secretory granule and in response to the proper stimulus, the pro-protein is processed to the active peptides, probably during the process of secretion. The processing pathway of pro-atrial natriuretic factor is discussed.