An enzyme which N-acetylates beta-endorphin has been identified and characterized in the rat brain and pituitary gland. The beta-endorphin acetyltransferase activity was localized almost exclusively in the intermediate lobe of the pituitary gland. beta-endorphin acetyltransferase activity was also present in the hypothalamus, a brain region which synthesizes beta-endorphin, but not the cerebellum, a region which does not synthesize beta-endorphin. The substrate specificity of beta-endorphin acetyltransferase appeared to be located in the NH2 terminus and midportions of the beta-endorphin sequence. The regional distribution and pharmacological specificity of beta-endorphin acetyltransferase indicate that it is a highly specialized regulatory enzyme. Because N-acetyl-beta-endorphin is nonanalgesic and does not bind to the opiate receptor (Smyth, D.G., Massey, D.E., Zakarian, S., and Finnie, M.D. (1979) Nature (Lond.) 279, 252-254), it appears that the physiological significance of beta-endorphin acetyltransferase is that it can modulate the activity of endorphin secreted from opiomelanotropinergic cells and neurons.