How streptococcal M protein or other surface proteins of gram-positive bacteria are anchored to the cell is poorly understood. Previously, we reported that M protein released after cell wall removal with a muralytic enzyme lacked the COOH terminal hydrophobic amino acids and charged tail predicted from DNA sequence. An endogenous membrane anchor-cleaving enzyme has now been identified with the ability to release M protein from isolated streptococcal protoplasts. At pH 5.5 in the presence of 30% raffinose, the streptococcal cell wall may be removed with a muralytic enzyme without releasing M protein from the resulting protoplasts indicating that the M molecule is attached through the bacterial cytoplasmic membrane. Release of M molecules occurs when the M protein-charged protoplasts are placed in raffinose buffer at pH 7.4. Although Zn2+, Cd2+, Ca2+, PHMB, and pHMPS inhibit the activity of the releasing enzyme, the blocking activity of Zn2+, Cd2+, and Ca2+ are reversible while PHMB and pHMPS are irreversible. PHMB-treated protoplasts are unable to release M protein at pH 7.4. However, M protein is liberated from these protoplasts when mixed with those prepared from M- streptococci serving as an enzyme source. The supernatant from M- protoplasts is unable to release M protein from PHMB-inactivated M+ protoplasts, confirming that the anchor-cleaving enzyme is membrane bound. Thus, the M protein releasing activity appears to be the result of a thiol-dependent anchor-cleaving enzyme. Streptococcal membranes treated with sodium carbonate and Triton X-114 still retain the M protein verifying that it is an integral membrane molecule. Evidence also is presented indicating significant sequence similarity between M protein and certain GPI-anchored proteins in the region responsible for protein anchoring.