The chemokine stromal-derived factor-1alpha (SDF-1alpha) is an essential regulator of hematopoiesis, lymphocyte homing, pre-B-cell growth, and angiogenesis. As SDF-1alpha is constitutively expressed in many tissues, chemokine function is mostly regulated by proteolytic degradation. Human serum cleaves the 68-amino acid chemokine, SDF-1alpha, at both termini. The enzyme or enzymes responsible for the removal of the carboxy-terminal lysine from SDF-1alpha, leading to significant reduction in biologic activity, have not been identified. Using a new biochemical assay for measuring the carboxy-terminal cleavage activity, we purified from serum and plasma a peptidase that specifically removes the carboxy-terminal lysine from SDF-1alpha and identified it as carboxypeptidase N (CPN, also known as kininase I, arginine carboxypeptidase, and anaphylotoxin inactivator). We demonstrate that SDF-1alpha in serum and plasma lacks the carboxy terminal lysine, and depletion of CPN from serum and plasma significantly reduces the SDF-1alpha carboxypeptidase activity. Purified CPN effectively and specifically removes the carboxy-terminal lysine from SDF-1alpha and significantly reduces the chemokine's biologic activity as a pre-B-cell growth factor and chemoattractant. Thus, in addition to its role as a regulator of the biologic activity of kinins and anaphylatoxins, CPN is an important regulator of the biologic activity of SDF-1alpha by reducing the chemokine-specific activity.