The authors review recent research on an enzyme hypothesized to play a major role in the degradation of insulin. After binding to its receptor on the cell surface, insulin is internalized by receptor-mediated endocytosis and degraded within components of the endosomal apparatus. Degradation of insulin is important in the termination of signaling and clearance of the circulating hormone. It has been proposed that insulin-degrading enzyme (IDE), an evolutionarily conserved, neutral thiol-metalloendopeptidase, plays a crucial role in the degradation of internalized insulin in many types of cells. Despite the substantial evidence supporting the importance of IDE in cellular insulin degradation, there is controversy over its mode and site of action, mainly because of its cytosolic location. Its physiological location in cells has recently been elucidated through subcellular fractionation of liver parenchyma and through immunofluorescence microscopy of stably transfected Chinese hamster ovary cells that overexpress IDE. These experiments have excluded the presence of the enzyme in endosomes and have defined a peroxisomal location, consistent with the presence of a peroxisomal targeting sequence at the carboxyl terminus of the protein. Recently, researchers have demonstrated the functional significance of peroxisome-associated IDE (type I peroxisomal enzyme) in degrading cleaved leader peptides of peroxisomal proteins targeted by the type II motif. IDE is the first cloned and characterized proteinase to be localized to peroxisomes. Moreover, IDE appears to be a member of a newly identified superfamily of metalloendopeptidases that has an HXXEH active-site motif. Although fundamental questions concerning the biological role of IDE remain, its high degree of evolutionary conservation suggests that it must have important functions and multifaceted biological significance.