1. Uncentrifuged and centrifuged rat intestinal contents were assayed for peptide hydrolase activity with glycyl-l-phenylalanine (Gly-Phe) and l-phenylalanyl-glycine (Phe-Gly) as substrates in the absence and presence of the intestinal cytosol peptide hydrolase inhibitor p-hydroxymercuribenzoate. 2. Jejunal contents hydrolysed Gly-Phe faster than Phe-Gly. Conversely, ileal contents hydrolysed Phe-Gly faster than Gly-Phe. 3. p-Hydroxymercuribenzoate markedly inhibited jejunal peptide hydrolase activity. There was ten times as much PHMB-resistant activity towards both dipeptides in ileal contents as in jejunal contents. 4. Most of the luminal enzyme activity was present in the supernatants after centrifugation, indicating the luminal enzymes exist in the soluble form. Although the presence of soluble bacterial enzymes cannot be excluded, peptide hydrolase enzymes in jejunal contents have the characteristics of mucosal cytosol enzymes whereas enzymes in ileal contents have the characteristics of mucosal brush border as well as cytosol enzymes.