Angiotensin-converting enzyme (ACE) is synthesized as a type 1 ectoprotein. It is released from the cell surface by a proteolytic cleavage-secretion process which is enhanced by treatment of the cells with phorbol esters. Here, we report the development of an in vitro cell-free assay system for the cleavage-secretion, its characterization, and the identification of a potent inhibitor of this process. Membranes prepared from ACE89 cells secreted the testicular isozyme of ACE (ACET) in a temperature- and time-dependent fashion. As expected, the in vitro secreted ACET lacked the membrane-anchoring carboxy-terminal tail of the cell-associated ACET. The in vitro secretase activity was resistant to high salt extraction and to inhibitors of serine, chymotrypsin, trypsin, cysteine, aspartate, and elastase type proteases. However, the activity was sensitive to metal ion chelators and to a synthetic hydroxamic acid derivative, compound 3, a known inhibitor of certain metalloproteases. Compound 3 very efficiently blocked both basal and phorbol ester-stimulated ACET secretion by ACE89 cells. The inhibition was rapid, dose-dependent, and reversible, and ACET synthesis, glycosylation, and transport were not affected. Cleavage-secretion of ACET in transiently transfected HeLa cells was also inhibited by compound 3. Finally, in vitro cleavage-secretion of the other isozyme of ACE, ACEP, by membranes isolated from rabbit lungs was strongly inhibited by compound 3. These results indicate that the cleavage-secretion of both isozymes of ACE is carried out by an integral membrane metalloprotease which is specifically inhibited by compound 3.