The neuropeptides arginine vasopressin and oxytocin are generated from their prohormones in the hypothalamoneurohypophysial system by enzymatic cleavages at paired basic residues (i.e. Lys-Arg). This study describes the purification of an enzyme from bovine neural lobe secretory vesicles, the putative site of this processing, which is capable of cleaving several prohormones at paired basic residues. The enzyme is a glycoprotein of Mr approximately 70,000 and has an acidic pH maximum. It processes the heterologous precursors pro-opiomelanocortin and insulin at paired basic residues in a manner similar to a pro-opiomelanocortin-converting enzyme derived from bovine intermediate lobe secretory vesicles which has been described previously. In addition, the neural lobe-derived converting enzyme cleaves the human vasopressin prohormone in vitro to yield arginine vasopressin-Gly10-Lys11-Arg12 as the major vasopressin cleavage product. This indicates that the enzymatic cleavage in the vasopressin precursor occurred primarily on the carboxyl side of the arginine in the pair of Lys-Arg basic residues separating the vasopressin peptide from the neurophysin moiety in the precursor. The properties of the neural and intermediate lobe-derived enzymes are virtually identical, raising the possibility that a family of similar enzymes may be responsible for cleaving a number of prohormones at paired basic residues in different tissues.