Pro-ocytocin/neurophysin convertase is a divalent cation-dependent endoprotease isolated from both bovine corpus luteum and neurohypophyseal secretory granules. The putative pro-ocytocin/neurophysin converting enzyme cleaves the Arg12-Ala13 bonds of both pro-ocytocin/neurophysin (1----20) and pro-ocytocin/neurophysin obtained by hemisynthesis. The minimal efficient substrate structure allowing recognition by this processing endoprotease was defined by measuring its cleavage efficiency and the inhibitory properties of a set of 34 selectively modified derivatives of the (1----20) NH2-terminal domain of the ocytocin/neurophysin precursor. The data demonstrate that: (i) the basic Lys11-Arg12 doublet, although necessary, is not sufficient; (ii) a minimal substrate length of nine amino acids (residues 7-15 or 8-16) is essential; (iii) those amino acids around the Lys-Arg doublet which contribute to the formation of a possible beta-turn-alpha-helix secondary structure are critical; (iv) substrate recognition by the enzyme may involve several subsites in which structural determinants, situated on both sides of the basic doublet, participate; (v) the NH2-terminal sequence of neurophysin plays a critical role in the correct reading of the cleavage sequence by the processing endoprotease. It is proposed, first, that this type of structural feature may constitute the basis of a general coding system for endoproteases involved in the processing of polypeptide hormone precursors; second, that in addition to its role in the intragranular packaging of the nonapeptide hormone, neurophysin plays a key role in the correct processing of its common precursor with ocytocin.