Lysates of isolated rat polymorphonuclear leukocytes and macrophages were found to generate xenopsin-related peptides when incubated with a liver extract used as a source of precursor. The lysosomal enzyme, cathepsin D, was also shown to display this property and to share with the lysate a similar pH dependence (optimum, approximately pH 3.5) and sensitivity to the acid protease inhibitor, pepstatin A (ID50: lysate, 10 nM; cathepsin D, 30 nM). When subjected to HPLC on mu-Bondapak C-18, the xenopsin-related peptides generated by the lysate eluted near to those formed by cathepsin D and when tested in a radioreceptor assay for neurotensin, they displayed similar cross-reactivities (peak 2, approximately 50%; peak 1, approximately 100%). These results indicate that cathepsin D from lysed granulocytes can process precursor protein(s) to form radioreceptor-active xenopsin-related peptides.