Pyrococcus horikoshii open reading frame PH1527 encodes a 39014 Da protein that shares about 30% identity with endoglucanases and members of the M42 peptidase family. Analytical ultracentrifugation and electron microscopy studies showed that the purified recombinant protein forms stable, large dodecameric complexes with a tetrahedral shape similar to the one described for DAP, a deblocking aminopeptidase that was characterized in the same organism. The two related proteins were named PhTET1 (for DAP) and PhTET2 (for PH1527). The substrate specificity and the mode of action of the PhTET2 complex were studied in detail and compared to those of PhTET1 and other assigned M42 peptidases. When assayed with short chromogenic peptides, PhTET2 was found to be an aminopeptidase, with a clear preference for leucine as the N-terminal amino acid. However, the enzyme can cleave moderately long polypeptide substrates of various compositions in a fairly unspecific manner. The hydrolytic mechanism was found to be nonprocessive. The enzyme has neither carboxypeptidase nor endoproteolytic activities, and it is devoid of N-terminal deblocking activity. PhTET2 was inhibited in the presence of EDTA and bestatin, and cobalt was found to be an activating metal. The PhTET2 protein is a highly thermostable enzyme that displays optimal activity around 100 degrees C over a broad pH array.