In eukaryotic cells ubiquitin is synthesized as a polyubiquitin protein or as a protein fused at the carboxyl terminus to other polypeptides. An enzyme activity, ubiquitin protein peptidase, has been proposed to process these precursors by cleaving the peptide bond between adjoining ubiquitin molecules or between ubiquitin and the fused peptides. Using the cleavage of a 35S-labeled yeast ubiquitin protein fused to a synthetic 38-residue peptide obtained by in vivo metabolic labeling in Escherichia coli in an expression system based on the interaction of bacteriophage T7 RNA polymerase and its promoter, it is possible to detect a processing activity in soluble yeast extract. The specificity of the cleavage suggests this activity could be the in vivo processing activity for various ubiquitin precursor proteins in yeast cells. A similarly labeled ubiquitin protein fused to one cysteine residue was also utilized to detect an activity capable of removing a single cysteine residue from ubiquitin in a soluble extract. Employing assays based on the cleavage of labeled ubiquitin protein fusions, a ubiquitin protein peptidase activity from Saccharomyces cerevisiae was purified about 15,000-fold to yield a protein mixture consisting of only a few protein species. The major protein band which comigrated with the activities in in vitro assays has an apparent molecular weight of 29,000 when analyzed by sodium dodecyl sulfate-polyacrylamide gel electrophoresis. Two other protein species, about 20,000 and 10,000 in molecular weight, also comigrated with the in vitro activities throughout the purification procedure. Though our most purified protein fraction was shown to cleave various artificial ubiquitin protein fusions under our experimental conditions, it cannot cleave a ubiquitin dimer protein, suggesting the existence of functionally distinct ubiquitin protein peptidases. Our experimental protocol for preparing various labeled ubiquitin protein precursors provides a means to explore various processing enzymes existing in cells. The same protocol may also be adapted to prepare substrates for the study of other specific protein processing enzymes.