Thyrotropin-releasing hormone is inactivated in the extracellular space by a membrane-bound peptidase, pyroglutamyl aminopeptidase II (PPII), a member of the M1 family of zinc metallopeptidases. The functional significance of multiple PPII RNA species expression is unknown. We detected, in rat tissues, a RNA species derived from an alternative processing at the exon 14-intron 14 boundary. The alternatively processed RNA encoded a shorter version of PPII (PPII*), lacking part of the C-terminal domain. PPII* was expressed in COS-7 (or C6 glioma) cells but it did not exhibit any PPII activity. Co-transfection of PPII and increasing amounts of PPII* expression vectors resulted in a dose-dependent reduction in PPII activity and the formation of covalent PPII-PPII* heterodimers. PPII* is therefore a powerful dominant-negative isoform of PPII, and heterodimerization may be its mechanism of action. Natural expression of shortened versions of M1 aminopeptidases may constitute a new mode of regulation of their activity.