Mutations in the PEX gene are responsible for X-linked hypophosphatemic rickets. To gain insight into the role of PEX in normal physiology we have cloned the human full-length cDNA and studied its tissue expression, subcellular localization, and peptidase activity. We show that the cDNA encodes a 749-amino acid protein structurally related to a family of neutral endopeptidases that include neprilysin as prototype. By Northern blot analysis, the size of the full-length PEX transcript is 6.5 kilobases. PEX expression, as determined by semi-quantitative polymerase chain reaction, is high in bone and in tumor tissue associated with the paraneoplastic syndrome of renal phosphate wasting. PEX is glycosylated in the presence of canine microsomal membranes and partitions exclusively in the detergent phase from Triton X-114 extractions of transiently transfected COS cells. Immunofluorescence studies in A293 cells expressing PEX tagged with a c-myc epitope show a predominant cell-surface location for the protein with its COOH-terminal domain in the extracellular compartment, substantiating the assumption that PEX, like other members of the neutral endopeptidase family, is a type II integral membrane glycoprotein. Cell membranes from cultured COS cells transiently expressing PEX efficiently degrade exogenously added parathyroid hormone-derived peptides, demonstrating for the first time that recombinant PEX can function as an endopeptidase. PEX peptidase activity may provide a convenient target for pharmacological intervention in states of altered phosphate homeostasis and in metabolic bone diseases.