Isoprenylated/methylated heterotrimeric G proteins play important roles in a large number of signal transduction processes. While the enzymology of isoprenylated/methylated protein biosynthesis is well understood, nothing is known about how these proteins are degraded. In this article, a novel endoproteolytic activity has been identified from bovine retina and is shown specifically to remove the glycylfarnesylcysteine moiety from the carboxyl terminus of T gamma. When tested in a GTP binding assay, freshly prepared proteolyzed T beta gamma was unable to catalyze the binding of guanosine 5'-(gamma-thio)triphosphate (GTP-gamma-S) to T alpha in the presence of detergent solubilized rhodopsin. The optimum pH for this proteolytic activity is approximately 6, and the pH profile corresponds to an enzyme having pKa's of 4.4 +/- 0.1 and 7.7 +/- 0.1 for its active site residues. After analyzing a series of protease inhibitors, we found E-64, a specific thiol protease inhibitor, to be the most effective irreversible inhibitor of this enzyme, suggesting that the endoprotease might be a thiol protease. Affinity labeling studies using biotinylated affinity labeling probes have identified a 35 kDa protein as a candidate for the endoprotease.