Insulin degrading enzyme (IDE) is an evolutionarily conserved, nonlysosomal metalloprotease that has been implicated in the cellular degradation and processing of insulin. However, the site and the mode of the action of this enzyme are unclear. We have addressed these questions by establishing several Ltk- cell lines that can overexpress human insulin-degrading enzyme (hIDE) upon glucocorticoid induction. The level of overexpression of hIDE protein and transcripts in these lines correlates well with an increase in insulin degradation in both cell lysates and intact cells. Comparison of the deduced amino acid sequences of mammalian and Drosophila IDEs reveals a conserved carboxyl-terminal peroxisomal targeting sequence (A/S-K-L), suggesting that IDE may be localized in peroxisomes. To test this possibility, we determined the cellular location of the stably transfected hIDE by both immunofluorescence and immunocryoelectron microscopy. The overexpressed hIDE predominantly colocalized with catalase in peroxisomes, although IDE was also found in the cytosol at a much lower concentration. These results demonstrate that stably transfected IDE catalyzes a rate-limiting step in cellular insulin degradation and is localized predominantly in peroxisomes.