The subcellular site of the further processing (NH2-terminal acetylation and COOH-terminal proteolysis) of beta-endorphin-sized molecules in the rat intermediate pituitary has been studied. Rat intermediate pituitary primary cultures that had been incubated in radioactively labeled amino acids were homogenized and the secretory granule fraction was separated from the rough endoplasmic reticulum/Golgi apparatus fraction. The labeled beta-endorphin-sized molecules in each subcellular fraction were analyzed by immunoprecipitation, gel filtration chromatography, and ion exchange chromatography. A large percentage of the labeled beta-endorphin-sized molecules became NH2 terminally acetylated after becoming associated with the secretory granule fraction; most of the further COOH-terminal proteolytic processing of alpha-N-acetyl-beta-endorphin(1-31) to form alpha-N-acetyl-beta-endorphin(1-27) and alpha-N-acetyl-beta-endorphin(1-26) also occurred when the labeled beta-endorphin-sized molecules were associated with the secretory granule fraction. The acetylation of alpha-melanocyte-stimulating hormone (alpha MSH)-sized molecules was also investigated in rat intermediate pituitary primary cell cultures by immunoprecipitation, gel filtration chromatography, and reverse-phase high pressure liquid chromatography. Pulse-chase labeling experiments showed that newly synthesized molecules co-migrating with adrenocorticotropic hormone ((ACTH)(1-13)NH2) were converted first to molecules similar to alpha MSH (alpha-N-acetyl-ACTH(1-13)NH2) and then to molecules similar to alpha-N,O-diacetyl-alpha MSH. These results demonstrate that the enzyme activity(s) responsible for the NH2-terminal acetylation of beta-endorphin alpha MSH-sized molecules is located in the secretory granules of the rat intermediate pituitary.