When grown in liquid cultures allowing the formation of nematode traps, the fungus Arthrobotrys oligospora produced two extracellular proteases hydrolysing the chromogenic substrate Azocoll. The protease activity was separated into two fractions (FI and FII) using anion-exchange chromatography. In bioassays, protease(s) present in FII immobilized the free-living nematode Panagrellus redivivus indicating that the enzyme(s) might be involved in the infection of nematodes. A protease designated PII was purified from FII to apparent homogeneity by hydrophobic interaction and size-exclusion chromatography, resulting in an approximately 15-fold increase in specific activity. The purified enzyme was glycosylated, had a molecular mass of approximately 35 kDa (gel filtration) and an isoelectric point of pH 4.6. PII immobilized P. redivivus in bioassays and hydrolysed proteins of the purified cuticle. The enzyme hydrolysed several protein substrates including casein, bovine serum albumin and gelatin, but not native collagen. Examination of substrate specificity with synthetic peptides showed that PII readily hydrolysed tripeptides with aromatic or basic amino acids including N-benzoyl-L-phenylalanyl-L-valyl-L-arginine-4-nitroanilide (Bz-Phe-Val-Arg-NA) and succinyl-glycyl-glycyl-L-phenylalanine-4-nitroanilide (Suc-Gly-Gly-Phe-NA). Mono-peptides were hydrolysed at considerably slower rates. PII had an optimum activity between pH 7 and 9 and was susceptible to autodegradation. PII was inhibited by several serine protease inhibitors including phenylmethylsulfonyl fluoride (PMSF), chymostatin and antipain. The protease was N-terminally blocked, but the sequence of one internal peptide showed a high homology with a region containing the active site histidine residue of the subtilisin family of serine proteases.