A glycosyl hydrolase family 38 enzyme, neutral alpha-mannosidase, has been proposed to be involved in hydrolysis of cytosolic free oligosaccharides originating either from ER-misfolded glycoproteins or the N-glycosylation process. Although this enzyme has been isolated from the cytosol, it has also been linked to the ER by subcellular fractionations. We have studied the subcellular localization of neutral alpha-mannosidase by immunofluorescence microscopy and characterized the human recombinant enzyme with natural substrates to elucidate the biological function of this enzyme. Immunofluorescence microscopy showed neutral alpha-mannosidase to be absent from the ER, lysosomes, and autophagosomes, and being granularly distributed in the cytosol. In experiments with fluorescent recovery after photo bleaching, neutral alpha-mannosidase had slower than expected two-phased diffusion in the cytosol. This result together with the granular appearance in immunostaining suggests that portion of the neutral alpha-mannosidase pool is somehow complexed. The purified recombinant enzyme is a tetramer and has a neutral pH optimum for activity. It hydrolyzed Man(9)GlcNAc to Man(5)GlcNAc in the presence of Fe(2+), Co(2+), and Mn(2+), and uniquely to neutral alpha-mannosidases from other organisms, the human enzyme was more activated by Fe(2+) than Co(2+). Without activating cations the main reaction product was Man(8)GlcNAc, and Cu(2+) completely inhibited neutral alpha-mannosidase. Our findings from enzyme-substrate characterizations and subcellular localization studies support the suggested role for neutral alpha-mannosidase in hydrolysis of soluble cytosolic oligomannosides.