Yeast cells express an alternate enzyme encoded by the YAP3 gene which can process pro-alpha-mating factor when this pheromone is overexpressed in KEX2-deficient mutants. The YAP3 gene product is an aspartic protease (YAP3) that cleaves at paired basic residues (Egel-Mittani, M., Flygenring, H.P., and Hansen, M. T. (1990) Yeast 6, 127-137). In this study, the YAP3 gene was overexpressed in the BJ 3501 strain of Saccharomyces cerevisiae. YAP3 was purified to apparent homogeneity using concanavalin A and pepstatin A affinity chromatography. The enzyme was characterized as an M(r) 68,000 glycoprotein with a pH optimum of 4.0-4.5. It was inhibited by pepstatin A and activated by 5 mM Ca2+. YAP3 cleaved at paired basic residues of mouse pro-opiomelanocortin (POMC) to yield adrenocorticotropin (ACTH) and beta-lipotropin (LPH); human beta-LPH to yield beta-endorphin-(1-31), beta-endorphin-(1-29), beta-endorphin-(1-28), gamma-LPH, and beta-melanocyte-stimulating hormone; and bovine N-POMC1-77 to yield gamma 3-melanocyte-stimulating hormone. It also cleaved the tetrabasic residues of ACTH1-39 to yield primarily ACTH1-15 and Lys-Arg-corticotropin-like intermediate lobe peptide. The physical properties, pH optimum, and specificity of YAP3 indicate that it is a homologue of the mammalian POMC-converting enzyme (EC 3.4.23.17), a paired basic residue-specific aspartic protease from bovine pituitary intermediate lobe secretory granules (Loh, Y. P., Parish, D.C., and Tuteja, R. (1985) J. Biol. Chem. 260, 7194-7205).