Tripeptidyl peptidase I (TTP-I), also known as CLN2, a member of the family of serine-carboxyl proteinases (S53), plays a crucial role in lysosomal protein degradation and a deficiency in this enzyme leads to fatal neurodegenerative disease. Recombinant human TPP-I and its mutants were analyzed in order to clarify the biochemical role of TPP-I and its mechanism of activity. Ser280, Glu77, and Asp81 were identified as the catalytic residues based on mutational analyses, inhibition studies, and sequence similarities with other family members. TPP-I hydrolyzed most effectively the peptide Ala-Arg-Phe*Nph-Arg-Leu (*, cleavage site) (k(cat)/K(m) = 2.94 microM(-1).s(-1)). The k(cat)/K(m) value for this substrate was 40 times higher than that for Ala-Ala-Phe-MCA. Coupled with other data, these results strongly suggest that the substrate-binding cleft of TPP-I is composed of only six subsites (S(3)-S(3)'). TPP-I prefers bulky and hydrophobic amino acid residues at the P(1) position and Ala, Arg, or Asp at the P(2) position. Hydrophilic interactions at the S(2) subsite are necessary for TPP-I, and this feature is unique among serine-carboxyl proteinases. TPP-I might have evolved from an ancestral gene in order to cleave, in cooperation with cathepsins, useless proteins in the lysosomal compartment.