Membrane peptidases are a group of ectoenzymes with a broad functional repertoire. In protein metabolism, their importance is well known, especially in peptide degradation and amino acid scavenging at the intestinal and renal brush border. However, they also perform more subtle tasks; not only do they provide or extinguish signals by cleaving exterior peptide mediators, but they also may function as receptors or participate in signal transduction or in adhesion. Dipeptidyl peptidase IV (DPPIV), which is identical to the lymphocyte surface glycoprotein CD26, is unique among these peptidases because of its ability to liberate Xaa-Pro and less efficiently Xaa-Ala dipeptides from the N-terminus of regulatory peptides. It occurs in the plasma membrane as a homodimer with a total molecular mass of 22-240 KdA and the C-terminal domain probably forms on alpha/beta hydrolase fold. In addition to, but independent of its serine type catalytic activity, DPPIV binds closely to the soluble extracellular enzyme adenosine deaminase. The in vivo expression on epithelial, endothelial and lymphoid cells of DPPIV is compatible with a role as physiological regulator of a number of peptides that serve as biochemical reporters between and within the immune and neuroendocrine system. Surprisingly, not cytokines with a N-terminal Xaa-Pro motif, but a number of chemokines have recently been identified as substrates. Despite DPPIV mediates only a minimal N-terminal truncation, important alterations in chemokine activities and receptor specificitIes were observed in vitro together with modified inflammatory and antiviral responses. Most probably the great flexibility of the N-terminus of a number of chemokines facilitates the accessibIlity to the catalytic site of DPPIV. Other known substrates which are subject in vitro to receptor-specific changes induced by DPPIV truncation include neuropeptides such as substance P, peptidE YY and neuropeptide Y. On the other hand, DPPIV mediated cleavage of the N-terminal His-Ala or Tyr-Ala dipeptides from circulating incretin hormones like, glucagon-like peptides (GLP)-1 and -2, gastric inhibitory polypeptide (GIP), all members of the enteroglucagon/GRF superfamily, results in their biological inactivation in vitro and in vivo. Administration of specific DPPIV inhibitors closes this pathway of incretin degradation and greatly enhances insulin secretion. The improved glucose tolerance in several animal models for type II diabetes points to specific DPPIV inhibition as a pharmaceutical approach for type 2 diabetes drug development.