An amidohydrolase activity present in rat brain microsomes catalyzes the hydrolysis of N-arachidonoyl-[3H]ethanolamine ([3H]anandamide), an endogenous cannabimimetic substance, forming [3H]ethanolamine and arachidonic acid. Amidohydrolase activity is maximal at pH 6 and 8, is independent of divalent cations, has an apparent Km for [3H]anandamide of 12.7 +/- 1.8 microM, and has a Vmax of 5630 +/- 200 pmol/min/mg of protein. Phenylmethylsulfonyl fluoride, a serine protease inhibitor, and p-bromophenacyl bromide, a histidine-alkylating reagent, inhibit the activity, whereas N-ethylmaleimide and various nonselective peptidase inhibitors (EDTA, o-phenanthroline, bacitracin) have no effect. Brain amidohydrolase activity exhibits high substrate specificity for [3H]anandamide; N-gamma-linolenoyl-, N-homo-gamma-linolenoyl-, and N-11,14-eicosadienoyl- are hydrolyzed at markedly slower rates. Moreover, N-11-eicosaenoyl- and N-palmitoyl-[3H]ethanolamine are not hydrolyzed. [3H]Anandamide hydrolysis is inhibited competitively by nonradioactive anandamide and by other N-acylethanolamines with the following rank order of potency: anandamide > N-linoleoyl- = N-cis-linolenoyl- = N-gamma-linolenoyl- = N- homo-gamma-linolenoyl- > N-11,14-eicosadienoyl- > N-oleoyl- > N- docosahexaenoyl- > N-docosatetraenoyl > N-linoelaidoyl- > N-eicosaenoyl- > N- palmitoyl > or = N-elaidoyl- = N-eicosanoyl-ethanolamine = no effect. Amidohydrolase activity is high in liver and brain and low in heart, kidney, intestine, stomach, lung, spleen, and skeletal muscle. Within the central nervous system, highest activity is found in globus pallidus and hippocampus, two regions rich in cannabinoid receptors, and lowest activity is found in brainstem and medulla, where cannabinoid receptors are sparse. The results, showing that brain amidohydrolase activity is selective for anandamide and enriched in areas of the central nervous system with high density of cannabinoid receptors, suggest that this activity may participate in the inactivation of anandamide at its sites of action.