Limited pepsin digestion of human plasma albumin at pH 3.5 and 0 degrees in the presence of octanoate caused cleavage at residue 307 of the albumin molecule to yield two fragments. Thw two fragments corresponding to the NH2- and the COOH-terminal halves of the molecule were isolated in yields of about 15%. The COOH-terminal fragment is a mixture in which about 85% of the molecules had an additional cleavage at residue 422 of the albumin molecule. The COOH-terminal fragment with the additional cleavage at residue 422 contains two peptides which are linked by a disulfide bridge at residues 391 and 437 of the albumin molecule. Both the NH2- and the COOH-terminal fragment of human albumin showed no detectable binding of octanoate anions, that is, less than 1/170 of the binding constant of the primary site of human albumin. These findings differ from earlier observations on limited pepsin digestion of bovine plasma albumin where the corresponding COOH-terminal fragment had the octanoate-binding activity, about 1/8 of the primary binding constant of bovine albumin, while the NH2-terminal fragment did not. The COOH-terminal fragment of bovine albumin did not have cleavage at residue 422 as in the corresponding fragment of human albumin. However, it is not clear that the loss of octanoate-binding activity of fragment C of human albumin is a direct consequence of the cleavage at residue 422.