Reversible carboxyl methylation of the C-terminal geranylgeranylcysteine of G25K may regulate its activity and cellular localization. Brain homogenates were examined for enzyme activities which hydrolyze the methyl ester of [H-3]methyl-G25K to produce [H-3]methanol. Methylesterase activity was detected in both soluble and membrane fractions. The soluble activity was fractionated into at least two distinct activities. One soluble activity appears to be due to the lysosomal protease, cathepsin B, based on sensitivity to certain protease inhibitors, acidic pH optimum, size, and ability to cleave the peptide substrate N alpha-CBZ-Arg-Arg-7 amido-4-methylcoumarin. A second soluble activity, associated with a protein of approximately 25 kDa, exhibits a neutral pH optimum, insensitivity to protease inhibitors, and inhibition by the esterase inhibitor, ebelactone B. The membrane fraction contains larger amounts of a similar methylesterase that may represent the physiologically relevant form of the enzyme. (C) 1995 Academic Press, Inc.