A subline of H35 hepatoma cells (H35D cells) that have been made resistant to 5,10-dideazatetrahydrofolate exhibits an increase in gamma-glutamyl hydrolase (GH) activity. GH is a lysosomal enzyme in H35 and H35D cells on the basis of comparison of the distribution of enzyme activity with other known lysosomal enzymes. The hydrolysis rate of methotrexate polyglutamate with isolated, intact lysosomes is 4-5-fold greater in H35D cells than in H35 cells. GH activity in isolated lysosomes is in part dependent on the presence of a reducing agent such as mercaptoethanol. Permeabilization of lysosomal preparations from both cell types by Triton X-100 causes a 10-fold enhancement in GH activity. The result of the enhanced activity of GH in H35D cells is a marked reduction in antifolylpolyglutamate concentration, with the parent antifolate being the predominant intracellular species found under all conditions tested. Unlike antifolates, the total intracellular folate concentration is nearly identical in both cells under standard culture conditions up to 10 microns folic acid. However, the chain length of folylpolyglutamates consists of predominantly triglutamates and tetraglutamates in H35D cells with increased GH, whereas it consists of pentaglutamates and hexaglutamates in the parental cells. At 50 and 100 microns folic acid, the folate accumulation in H35D cells is less than half that of H35 cells, and the predominant polyglutamate species in the H35D cells are the diglutamates through the tetraglutamates. The results demonstrate that the two H35 cell lines having equal folylpolyglutamate synthetase but that one with enhanced lysosomal GH activity exhibits a marked reduction in the amount and gamma-glutamyl chain length of folylpolyglutamates and antifolylpolyglutamates.