Removes dipeptides from the C-termini of N-blocked tripeptides, tetrapeptides and larger peptides. Hydrolysis of unblocked, C-terminal dipeptides from oligopeptides, with broad specificity. Does not hydrolyze bonds in which P1' is Pro, or both P1 and P1' are Gly. Binds 1 zinc ion. Unable to grow on N-acetyl-Ala-Ala-Ala as a nitrogen source. Belongs to the peptidase M3 family.