Investigations of peptide precursor processing in nerve cells, including studies on prooxytocin and provasopressin processing in the rat hypothalamo-neurohypophysial system, show that prohormone processing occurs during axonal transport of maturing secretory vesicles. Recent studies (Fricker et al., 1989; Rodriguez et al., 1989) show that carboxypeptidase H (CPH), one of several proteases required for prohormone processing, is synthesized as a proenzyme that presumably requires activation. To determine if pro-CPH, like prohormone precursors, is processed and activated during axonal transport, we have analyzed the molecular forms of CPH present at several levels in the rat hypothalamo-neurohypophysial system. These biochemical and immunochemical studies showed that the supraoptic nucleus (SON), a region enriched in neuronal cell bodies, possesses primarily an inactive 65-kDa species of CPH. The median eminence and pituitary stalk regions that are enriched in axons possess both the inactive 65-kDa and the active 55-kDa forms of CPH, and nerve terminals of the posterior pituitary contain primarily the active 55-kDa CPH. These results support the hypothesis that pro-CPH is processed and activated during axonal transport from neuronal perikarya of SON to nerve terminals of the posterior pituitary. Furthermore, analysis of immunoreactive CPH in the rat and bovine pituitary showed that each tissue possessed different relative amounts of zymogen compared to mature forms of CPH, suggesting that tissue-specific processing of pro- CPH occurs. Thus, the biosynthesis of active peptide hormones requires the simultaneous processing of proenzyme and prohormone.