We describe the synthesis and purification of two functional peptides, namely human insulin-like growth factor II (IGF-II) and Xenopus laevis magainin II in Hansenula polymorpha after their synthesis as hybrid proteins fused to the C terminus of endogenous amine oxidase. The hybrid genes, placed under control of the H. polymorpha alcohol oxidase promoter (P-AOX), were integrated into the genomic alcohol oxidase locus, yielding stable production strains. High-level synthesis of the fusion proteins, exceeding 20% of total cellular protein, was obtained when the transformed strains were grown in methanol-limited chemostat cultures; when expressed by itself, i.e. in the absence of the amine oxidase gene, IGF-II could not be recovered from crude cell extracts, probably as a result of rapid proteolytic degradation. Accumulation in peroxisomes did not significantly affect the IGF-II protein stability when expressed in the absence of the carrier protein. Apparently, fusion to the large (+/- 78 kDa) amine oxidase carrier particularly stabilizes the peptides and prevents them from proteolysis. After partial purification, the fusion partners were readily separated by factor Xa treatment.