The substrate specificity of lipoamidase, purified from the pig brain membrane with lipoyl 4-aminobenzoate (LPAB) as a substrate, was extensively studied. This single polypeptide was found to hydrolyse the bonding between amide, ester and peptide compounds. However, stringent structural requirements were found in the substrates, e.g. LPAB was hydrolysed, whereas biotinyl 4-aminobenzoate was not, as stated in our previous paper [Oizmui & Hayakawa (1990) Biochem. J. 266, 427-434]. The enzyme specifically recognized the whole molecular structure of the substrate, whereas it loosely recognized the bond structure of the substrate; e.g. the dipeptide Asp-Phe was not hydrolysed, whereas the methyl ester of Asp-Phe (aspartame) was. The exopeptidase activity was demonstrated by lipoamidase; however, longer peptides than the hexamer seemed not to be substrates. Lipoyl esters, which were electrically neutral, exhibited higher specificity with longer acyl groups. Molecular mass and molecular hydrophobicity (hydropathy) seemed to determine the substrate specificity. Lipoyl-lysine, acetylcholine and oligopeptides were hydrolysed at similar Km values; however, acetylcholine was hydrolysed at a velocity 100 times higher. Although many similar specificities were found between electric eel acetylcholinesterase and lipoamidase, distinctly different specificity was demonstrated with lipoyl compounds. The role of lipoamidase, which resides on the brain membrane and possesses higher specificity for hydrophobic molecules, remains to be elucidated.