A novel angiotensin-converting enzyme (ACE) homolog, named ACE2, is a monocarboxypeptidase which metabolizes several peptides. ACE2 degrades Angiotensin (Ang) II, a peptide with vasoconstrictive/proliferative effects, to generate Ang-(1-7), which acting through its receptor Mas exerts vasodilatory/anti-proliferative actions. In addition, as ACE2 is a multifunctional enzyme and its actions on other vasoactive peptides can also contribute to its vasoactive effects including the apelin-13 and apelin-17 peptides. The discovery of ACE2 corroborates the establishment of two counter-regulatory arms within the renin-angiotensin system. The first one is formed by the classical pathway involving the ACE-Ang II-AT(1) receptor axis and the second arm is constituted by the ACE2-Ang 1-7/Mas receptor axis. Loss of ACE2 enhances the adverse pathological remodeling susceptibility to pressure-overload and myocardial infarction. ACE2 is also a negative regulator of Ang II-induced myocardial hypertrophy, fibrosis, and diastolic dysfunction. The ACE2-Ang 1-7/Mas axis may represent new possibilities for developing novel therapeutic strategies for the treatment of hypertension and cardiovascular diseases. In this review, we will summarize the biochemical and pathophysiological aspects of ACE2 with a focus on its role in diastolic and systolic heart failure.