The role of rat intestinal angiotensin-converting enzyme (ACE; E.C 3.4.15.1) in the digestion and absorption of dietary protein was investigated. Enzyme activity was associated with the brush-border membrane fraction, with the highest activity in the proximal to midregion of the small intestine. Preliminary enzyme characterization studies were carried out using purified brush-border membrane preparations. When a variety of N-blocked synthetic peptides were used as potential substrates for ACE, activity was highest with those containing proline at the carboxy terminal position. The hydrolytic rates observed with these prolyl peptides were comparable to those observed when major digestive peptidases of the brush-border membrane such as aminopeptidase N and dipeptidyl aminopeptidase IV were assayed. When isolated rat jejunum was perfused in vivo with solutions of Bz-Gly-Ala-Pro, the dipeptide Ala-Pro was the main hydrolytic product detected in the perfusates. Absorption rates of the constituent amino acids, alanine and proline, depended on the concentration of peptide perfused. Captopril, an active site specific ACE inhibitor, significantly inhibited hydrolysis and absorption of constituent amino acids from Bz-Gly-Ala-Pro. These results show that intestinal brush-border membrane ACE functions as a digestive peptidase in addition to its role as a regulator of biologically active peptides in other tissues.