Lysosomal enzymes and IGF-II both bind to the mannose 6-phosphate (M6P)/IGF-II receptor. This receptor targets newly synthesized lysosomal enzymes to lysosomes. The functional meaning of IGF-II binding to this receptor is not well known. We have postulated that IGF-II, the Ser29 IGF-II variant (vIGF-II) and IGF-I on lysosomal cathepsin B and L activities from post-natal rabbit chondrocytes in vitro. This effect was compared with the ability of each peptide to stimulate chondrocyte-sulfated proteoglycan synthesis. The sulfating dose-response relationship of the IGF peptides corresponded to their relative binding affinities for the type I-IGF receptor (IGF-I > IGF-II > vIGF-II). The intracellular cathepsin B and L activities were inhibited in a time- and dose-dependent manner by IGF-II or vIGF-II. Maximal inhibition of cathepsin B and L activities (40 and 30% below controls, respectively) was found after an 8 h treatment with 100 ng/ml IGF-II or vIGF-II. By contrast, IGF-I up to 1 micrograms/ml or insulin up to 2 micrograms/ml had no inhibitory effect. The relative potency pattern corresponded to the binding profile of each ligand for the M6P/IGF-II receptor. A treatment of chondrocytes with IGF-I or insulin transiently increased the binding of radiolabelled IGF-II at the cell surface to approximately 120% of controls, whereas IGF-II or vIGF-II had no effect. Thus, it is unlikely that the inhibition of lysosomal enzyme activities by IGF-II peptides could result from a redistribution of M6P/IGF-II receptors from intracellular compartments to the plasma membrane. We hypothesize that internalized IGF-II peptides could occupy the intracellular M6P/IGF-II binding sites required for targeting of cathepsins B and L to lysosomes.