A previous in vivo study implicated the YAP3 and KEX2 genes in the proteolytic maturation of anglerfish prosomatostatins which were heterologously expressed in the yeast Saccharomyces cerevisiae. In the present report, we have determined the cleavage specificity of these enzymes by incubating them in vitro with synthetic peptides mimicking the potential processing sites present in the somatostatin precursors and with full length prosomatostatin I. The Yap3 enzyme was prepared from a membrane fraction of a YAP3-overexpressing yeast, and a soluble form of Kex2 obtained from the culture medium of insect cells which had been infected with a recombinant baculovirus expressing the KEX2 gene. The identity of the cleavage products was confirmed by amino acid analysis. Our results show that both endoproteases generate mature SRIF-28 from prosomatostatin-II but that only Yap3 can process the homologous monobasic cleavage site (ie single arginine residue) found in prosomatostatin-I. Both enzymes were also shown to recognize the Arg-Lys doublet found in prosomatostatin-I producing a lysine-extended form of SRIF-14, which indicates that cleavage occurred C-terminal to the arginine residue. In addition, Kex2 also hydrolyzed C-terminal to the Pro-Arg motif to release a tripeptide-extended form of SRIF-14. However, neither endoprotease could cleave after the Arg-Lys doublet to release mature SRIF-14. Taken together, our results indicate that the yeast Kex2 and Yap3 endoproteases have distinct, though overlapping, substrate specificities. The results also strongly support the role of Yap3 as a proprotein convertase which perhaps defines a new family of processing enzymes.