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A novel enzyme, "N^α-benzyloxycarbonyl amino acid urethane hydrolase II", was isolated from the cell-free extract of Lactobacillus fermenti 36 ATCC 9338. The enzyme showed hydrolytic activity toward N^α-benzyloxycarbonyl arginine. The purified enzyme was homogeneous as indicated by disc gel electrophoresis. The molecular weight of the native enzyme is about 200,000 as estimated by gel filtration method. The isoelectric point was 5.0. The enzyme activity was inhibited by p-chloromercuri-benzoic acid and ethylenediaminetetraacetic acid. The presence of divalent cations (i.e., Co^<2+> or Zn^<2+>) is essential for its activity.