Neutral endopeptidase 24.11 contains an active-site arginine residue involved in binding the free carboxylate of substrate peptides and inhibitors. This arginine reacts rapidly with [14C]phenylglyoxal, and its reaction is selectively blocked by the presence of either the substrate Met5-enkephalin, the competitive inhibitor phenylalanylalanine, or the transition state analog phosphoramidon. The phenylglyoxal-modified peptide was isolated by a procedure involving limited digestion by trypsin, separation of the tryptic peptides by high pressure liquid chromatography (HPLC), further digestion of the modified peptide by pepsin, and a final purification by HPLC. By this procedure arginine 102 was identified as the active-site arginine. Verification of this finding came from the use of site-directed mutagenesis in which this arginine was replaced by glutamine. Both the mutant and wild-type enzyme reacted equally well with an amide containing substrate, glutaryl-Ala-Ala-Phe-4-methoxy-2-naphthylamide. However, reaction of the mutant enzyme with a substrate containing a free COOH-terminal carboxylate, 5-dimethylaminonaphthalene-1-sulfonyl-D-Ala-Gly-(NO2)Phe-Gly, was barely detectable with the mutant enzyme. Similarly the mutant enzyme showed a loss of selectivity in inhibition by D-Ala2-Met5-enkephalin compared to the corresponding amide but exhibited no difference in the maximal velocity for hydrolysis of D-Ala2-Met5-enkephalin and its amide.