Carboxypeptidase E functions in the production of nearly all neuropeptides and peptide hormones. The enzyme acts as an exopeptidase to activate neuropeptides. It does that by cleaving off basic C-terminal amino acids, producing the active form of the peptide. Products of carboxypeptidase E include insulin, the enkephalins, vasopressin, oxytocin, and most other neuroendocrine peptide hormones and neuropeptides.
It has been proposed that membrane-associated carboxypeptidase E acts as a sorting signal for regulated secretory proteins in the trans-Golgi network of the pituitary and in secretory granules; regulated secretory proteins are mostly hormones and neuropeptides. However, this role for carboxypeptidase E remains controversial, and evidence shows that this enzyme is not necessary for the sorting of regulated secretory proteins.