Endothelins (ET) are a family of potent vasoactive peptides that are produced from biologically inactive intermediates, termed big endothelins, via a proteolytic processing at Trp21-Val/Ile22. We recently cloned and characterized a membrane-bound metalloprotease that catalyzes this proteolytic activation, endothelin-converting enzyme-1 (ECE-1) (Xu, D., Emoto, N., Giaid, A., Slaughter, C., Kaw, S., deWit, D., and Yanagisawa, M. (1994) Cell 78, 473-485). This enzyme was shown to function in the secretory pathway as well as on the cell surface. Here we report molecular cloning of another novel enzyme, ECE-2, that produces mature ET-1 from big ET-1 both in vitro and in transfected cells. The cDNA sequence predicts that bovine ECE-2 is a metalloprotease structurally related to ECE-1, neutral endopeptidase 24.11, and human Kell blood group protein. The deduced amino acid sequence of ECE-2 is most similar to ECE-1, with an overall identity of 59%. ECE-2 resembles ECE-1 in that it is inhibited in vitro by phosphoramidon and FR901533 but not by thiorphan or captopril, and it converts big ET-1 more efficiently than big ET-2 or big ET-3. However, ECE-2 also exhibits the following striking differences from ECE-1. (i) The sensitivity of ECE-2 to phosphoramidon is 250-fold higher as compared with ECE-1, while FR901533 inhibits both enzymes at similar concentrations. (ii) ECE-2 has an acidic pH optimum at pH 5.5, which is in sharp contrast to the neutral pH optimum of ECE-1. ECE-2 has a narrow pH profile and is virtually inactive at neutral pH. Chinese hamster ovary (CHO) cells, which lack detectable levels of endogenous ECE activity, secrete mature ET-1 into the medium when doubly transfected with ECE-2 and prepro-ET-1 cDNAs. However, ECE-2-transfected CHO cells do not efficiently produce mature ET-1 when present with an exogenous source of big ET-1 through coculture with prepro-ET-1-transfected CHO cells. These findings suggest that ECE-2 acts as an intracellular enzyme responsible for the conversion of endogenously synthesized big ET-1 at the trans-Golgi network, where the vesicular fluid is acidified.