Proalbumin differs from serum albumin in containing a leading hexapeptide segment, Arg-Gly-Val-Phe-Arg-Arg. This propeptide is removed in the Golgi complex immediately prior to secretion of the albumin, but its fate and possible functions are unknown. We have tested for the presence of the propeptide and its immediate catabolic products in rat liver and plasma and have studied both the disappearance of 3H-propeptide after intravenous injection and the breakdown of synthetic propeptide by rat liver cell components and plasma in vitro. We found no detectable propeptide or its two pentapeptide derivatives in rat liver or plasma at a sensitivity of less than 1 microM. Injected 3H-propeptide was completely cleared from blood within 2 min. No binding of free propeptide to serum albumin was observed. Liver cell fractions as well as blood plasma degraded added propeptide, with the highest activity being observed in smooth microsomes, the Golgi-enriched fraction, and plasma membrane. These preparations chiefly removed the terminal arginine residues, whereas enzymes in the cytosol degraded the peptide completely to amino acids. The activity in plasma resided largely in an alpha-globulin with molecular mass of about 280,000 Da which appears to be carboxypeptidase N. We conclude that the liberated propeptide is quickly broken down within the liver cell and does not accumulate in an amount sufficient to exert feedback or other effects on albumin synthesis.