Calcium-activated protease (CAP) activity was studied in various neural tissues of the squid using endogenous (neurofilament protein) and exogenous ([14C]casein) substrate assays. Both assays demonstrated a significant CAP activity in perikarya from stellate ganglia, in axoplasm extruded from the giant axon, and in squid retinal fibers. The endogenous protein substrates in the perikarya and axons were 60,000 and 200,000 daltons, respectively. The Km for the CAP degradation of [14C] casein in axoplasm was about 2 x10-6 m. In contrast, both assays detected no CAP activity nor endogenous substrate in nerve terminals (synaptosomes from squid optic lobe). The absence of both CAP activity and endogenous substrate in nerve endings suggests that the axonal neurofilaments are degraded by CAP at the axon-nerve ending junction, followed by an autoinactivation of the CAP. Consistent with this hypothesis is that exposure of axoplasmic CAP to calcium leads to a rapid degradation of axonal neurofilament protein (t 1/2 less than 2 min) and a slower inactivation of the CAP (t 1/2 = 90 min). Axonal CAP requires a relatively high concentration of CA2+ sensitivity form of CAP found in other tissues.