gamma-Endorphin is a naturally occurring biologically active peptide that is produced by an endopeptidase activity cleaving its precursor beta-endorphin. This enzyme was termed gamma-endorphin generating enzyme (gamma-EGE). In order to quantitate gamma-EGE activity by means of a simple and sensitive assay two synthetic peptides derived from the sequence surrounding the gamma-EGE cleavage site in beta-endorphin were tested as substrates. One of these peptides Ac-Val-Thr-Leu-Phe-Lys-NHCH3 fulfilled all criteria for a suitable gamma-EGE substrate. The peptide was exclusively cleaved at the correct bond for gamma-EGE upon incubation with brain synaptic membranes, and this cleavage was inhibited by the naturally occurring substrate beta-endorphin. The peptide was insensitive to cleavage by exopeptidases and cathepsin D. Addition of a 14C-labeled methyl group at the lysine residue of this peptide by reductive methylation did not alter its properties as a substrate for gamma-EGE activity. The use of the 14C-labeled peptide allowed sensitive quantitation of its radioactive products after simple separation by hydrophobic chromatography on minicolumns containing polystyrene beads. gamma-EGE activity increased linearly with a protein concentration and incubation time. This assay can be used for reliable quantitation of gamma-EGE activity and permits investigations on the regulation of gamma-endorphin production.