Saccharomyces cerevisiae is a widely used host in the production of therapeutic peptides and proteins. Here we report the identification of a novel endoprotease in S. cerevisiae. It is encoded by the CYM1 gene and is specific for the C-terminus of basic residues of heterologously expressed peptides. Gene disruption of CYM1 not only reduced the intracellular proteolysis, but also enhanced the secretion of heterologously expressed peptides such as growth hormone, pro-B-type natriuretic peptide and pro-cholecystokinin. Cym1p resembles metalloendoproteases of the pitrilysin family with the HXXEH(X)E(71-77) catalytic domain as seen in insulysin, nardilysin and human metalloprotease 1. It is a nuclear encoded protease that localizes to mitochondria without a hydrophobic N-terminal signal sequence or a C-terminal tail-anchor. The protease does not require post-translational processing prior to activation and it contains cytosolic activity that processes peptides designated for the secretory pathway prior to translocation into the endoplasmic reticulum.