VanY is a protein with a molecular mass of 34.8 kDa encoded by vanY, a member of the high-level vancomycin resistance gene cluster found on plasmid pIP816 in Enterococcus faecium BM4147. Extracts from Escherichia coli JM83 bearing plasmid pAT383, which contains the vanY gene, were examined for enzymatic hydrolysis of peptidoglycan precursors. VanY was associated with the cell membranes and cleaved the C-terminal D-alanine residue of UDP-muramyl-pentapeptide but did not display transpeptidase or beta-lactamase activities. The DD-carboxypeptidase activity was not inhibited by beta-lactam antibiotics. VanY released the C-terminal D-hydroxy acid from depsipeptides produced by the vancomycin resistance protein VanA. These results demonstrate that VanY should contribute in vivo to the hydrolysis of both the D-alanyl-D-alanine- and the depsipeptide-containing peptidoglycan precursors.