Proline-specific endopeptidase (PSE) (EC 3.4.21.26) was investigated for its potential as a catalyst in peptide synthesis. Using an activated peptide ester or a peptide amide as the acyl component, the enzyme catalyzed kinetically controlled aminolysis and transpeptidation respectively, with various amino acid amides as acyl accepters. To a certain extent the nucleophile preference reflected the amino acid preference in the S-1’-position of the enzyme in peptide hydrolysis : the highest fractions of aminolysis were obtained using amino acid amides with hydrophobic side-chains (e.g. Leu-NH2, Phe-NH2). PSE also catalyzed the thermodynamically controlled condensation of short peptides with a free carboxyterminus and various amino acid amides. This enabled us to examine the acceptance of different acyl components in the substrate-binding site of the enzyme with regard to their amino acid composition : In the S-1 position proline was clearly favored, but alanine was also accepted, whereas the S-2 subsite accepted various amino acids rather unspecifically. Since PSE was shown to be extremely sensitive against water-miscible organic solvents, an alternative approach was used to increase yields in enzymatic peptide synthesis : a derivative of PSE in which the catalytic Ser-556 is converted to a Cys was constructed by protein engineering. This mutant (PSE(cys)) exhibited a dramatically increased peptide ligase activity in aqueous solution.