Involved in degradation of small peptides. Digests preferentially peptides containing an aliphatic or hydrophobic residue in P1' position, as well as methionine, leucine or phenylalanine in P1 position of ester substrate.

Enters the endoplasmic reticulum as an inactive zymogen and is modified by four N-linked core oligosaccharides, giving rise to a precursor known as P1 (67 kDa). As P1 transits through the Golgi, extension of its core oligosaccharides leads to the Golgi-modified P2 precursor (69 kDa). P2 is sorted away from secretory proteins at or beyond a late Golgi compartment and is subsequently delivered to the vacuole via a prevacuolar endosome-like compartment. Upon arrival in the vacuole, the N-terminal prosegment of P2 is cleaved to yield the enzymatically active mature vacuolar form of CPY (61 kDa).