Insulin protease was purified 700-fold from rat liver homogenate by combined ultracentrifugation, ammonium sulfate fractionation, and glucagon-Sepharose-4B affinity chromatography. Optimum degradation of insulin was observed at pH 7.6 with the purified protease whose Km was 24 nM. The enzyme activity was inhibited completely by N-ethylmaleimide, p-hydroxymercuribenzoate, and heavy metals at 1 mM, whereas at the same concentration glutathione and mercaptoethanol stimulated the protease activity. These results indicate that the catabolic activity of the protease is sulfhydryl dependent. Furthermore, the activity of insulin protease was also enhanced by calcium and other divalent metal ions at a concentration of 1 mM. When supernatants, recovered from rat liver homogenates after centrifugation at 100,000g, were subjected to combined Sepharose 4B-insulin protease affinity chromatography and dialysis, a potent inhibitor of insulin protease was obtained which was heat stable. On the basis of kinetic studies, the inhibition of insulin degradation caused by this inhibitor was of the competitive type. Greater than 90% of the inhibitor activity was retained on dialysis with tubing with an inclusion limit of 3500 Da, whereas only 10% of this activity could be retained in dialysis tubing with an exclusion limit of 15,000 Da. These findings suggest that the insulin protease inhibitor is a low-molecular-weight protein. Analysis of homogenates from 13 different tissues of the rat showed that the highest levels of insulin protease inhibitor activity were associated with those tissues which have the highest capacity to degrade insulin. These data suggest that insulin protease and insulin protease inhibitor may be an important natural regulatory mechanism of insulin activity.