The Saccharomyces cerevisiae YPS2 (formerly MKC7) gene product is a glycosylphosphatidylinositol-linked aspartyl protease that functions as a yeast secretase. Here, the glycosylphosphatidylinositol-linked form of yapsin 2 (Mkc7p) was purified to homogeneity from the membrane fraction of an overexpressing yeast strain. Purified yapsin 2 migrated diffusely in SDS-polyacrylamide gel electrophoresis (molecular mass approximately 200 kDa), suggesting extensive, heterogeneous glycosylation. Studies using internally quenched fluorogenic peptide substrates revealed cleavage by the enzyme carboxyl to Lys or Arg. No cleavage was seen when both Lys and Arg were absent. No significant enhancement was seen with multiple basic residues. However, cleavage always occurred carboxyl to the most COOH-terminal basic residue. V(max)/K(m) was insensitive to P(2) and P(3) residues except that Pro at P(2) blocked cleavage entirely. These results suggest that yapsin 2 is a monobasic amino acid-specific protease that requires a basic residue at P(1) and excludes basic residues from P(1)'. The pH dependence of V(max)/K(m) for a substrate containing a pro-alpha factor cleavage site was bell-shaped, with a maximum near pH 4.0. However, V(max)/K(m) for a substrate mimicking the alpha-secretase site in human beta amyloid precursor protein was optimal near pH 6.0, consistent with cleavage of beta amyloid precursor protein by yapsin 2 when expressed in yeast.