J. Neurochem. (2012) 122, 512–522.AbstractPeptide neurotransmitters function as key intercellular signaling molecules in the nervous system. These peptides are generated in secretory vesicles from proneuropeptides by proteolytic processing at dibasic residues, followed by removal of N‐ and/or C‐terminal basic residues to form active peptides. Enkephalin biosynthesis from proenkephalin utilizes the cysteine protease cathepsin L and the subtilisin‐like prohormone convertase 2 (PC2). Cathepsin L generates peptide intermediates with N‐terminal basic residue extensions, which must be removed by an aminopeptidase. In this study, we identified cathepsin H as an aminopeptidase in secretory vesicles that produces (Met)enkephalin (ME) by sequential removal of basic residues from KR‐ME and KK‐ME, supported by in vivo knockout of the cathepsin H gene. Localization of cathepsin H in secretory vesicles was demonstrated by immunoelectron microscopy and immunofluorescence deconvolution microscopy. Purified human cathepsin H sequentially removes N‐terminal basic residues to generate ME, with peptide products characterized by nano‐LC‐MS/MS tandem mass spectrometry. Cathepsin H shows highest activities for cleaving N‐terminal basic residues (Arg and Lys) among amino acid fluorogenic substrates. Notably, knockout of the cathepsin H gene results in reduction of ME in mouse brain. Cathepsin H deficient mice also show a substantial decrease in galanin peptide neurotransmitter levels in brain. These results illustrate a role for cathepsin H as an aminopeptidase for enkephalin and galanin peptide neurotransmitter production.