Peptidase D of Escherichia coli was overproduced from a multicopy plasmid and purified to electrophoretic homogeneity. The pure enzyme was stable at 4 degrees C or -20 degrees C and had a pH optimum at pH 9, and a pI of 4.7; the temperature optimum was at 37 degrees C. As the enzyme was activated by Co2+ and Zn2+, and deactivated by metal chelators, it appears to be a metallopeptidase. By activity staining of native gels, 11 dipeptides which are preferentially cleaved by peptidase D were identified. Peptidase D activity required dipeptide substrates with an unblocked amino terminus and the amino group in the alpha or beta position. Non-protein amino acids and proline were not accepted in the C-terminal position, whereas some dipeptide amides and formyl amino acids were hydrolyzed. Km values of 2 to 5 mM indicate a relatively poor interaction of the enzyme with its substrates.