The sorting signal motif that is both sufficient and necessary for targeting pro-opiomelanocortin (POMC, pro-ACTH/endorphin) to the regulated secretory pathway was identified. This motif consists of a 13 amino acid amphipathic heart-shaped loop with two lobes located at the N- terminus of POMC. The amphipathic loop contains four amino acids Asp-10, Leu-11, Glu-14, Leu-18 which are highly conserved across species and may be involved in the sorting mechanism by facilitating ionic and hydrophobic interactions with a putative sorting receptor. A novel class of aspartic protease capable of processing prohormones at paired and monobasic residue sites was studied. One of these is a yeast aspartic protease 3 (YAP3) which we have purified and characterized. This enzyme recognized three motifs in different prohormones studied. They are a pair of basic residues; and a pair of mon-basic residue, with an additional basic residue at the P4 to P6 position upstream or P4' to P6' position downstream from the cleavage site. The specificity and pH optimum of YAP3 were similar to the mammalian aspartic protease, pro- opiomelanocortin converting enzyme (PCE). PCE was shown to cross-react with a YAP3 antibody on Western blots suggesting that YAP3 and PCE are homologues. Immunocytochemistry using the YAP3 antibody showed immunopositive cells in neuropeptide-rich regions of mouse brain: the arcuate nucleus, paraventricular nucleus, and the pyramidal cells and granular cell layer in the hippocampus. YAP3-related cDNA clones have now been obtained from a mouse brain library and are currently being sequenced.