Carboxypeptidase M (CPM), an extracellular glycosylphosphatidyl-inositol(GPI)-anchored membrane glycoprotein belonging to the CPN/E subfamily of "regulatory" metallo-carboxypeptidases, specifically removes C-terminal basic residues from peptides and proteins. Due to its wide distribution in human tissues, CPM is believed to play important roles in the control of peptide hormone and growth factor activity at the cell surface, and in the membrane-localized degradation of extracellular proteins. We have crystallized human GPI-free CPM, and have determined and refined its 3.0A crystal structure. The structure analysis reveals that CPM consists of a 295 residue N-terminal catalytic domain similar to that of duck CPD-2 (but only distantly related to CPA/B), an adjacent 86 residue beta-sandwich C-terminal domain characteristic of the CPN/E family but more conically shaped than the equivalent domain in CPD-2, and a unique, partially disordered 25 residue C-terminal extension to which the GPI membrane-anchor is post-translationally attached. Through this GPI anchor, and presumably via some positively charged side-chains of the C-terminal domain, the CPM molecule may interact with the membrane in such a way that its active centre will face alongside, i.e. well suited to interact with other membrane-bound protein substrates or small peptides. Modelling of the C-terminal part of the natural substrate Arg(6)-Met-enkephalin into the active site shows that the S1' pocket of CPM is particularly well designed to accommodate P1'-Arg residues, in agreement with the preference of CPM for cleaving C-terminal Arg.