The X-Pro peptide bond (in which X represents any amino acid residue) in peptides and proteins is resistant to cleavage by most proteolytic enzymes. We show that [Pd(H2O)(4)](2+) ion can selectively hydrolyze this tertiary peptide bond within the X-Pro-Met and X-Pro-His sequence segments. The hydrolysis requires an equimolar amount of the Pd(II) reagent and occurs under mild conditions-at temperature as low as 20 degreesC (with half-life of 1.0 h at pH 2.0) and at pH as high as 7.0 (with half-life of 4.2 h at pH 7.0 and 40 degreesC). The secondary pepticle bond, exemplified by X-Gly in the X-Gly-Met and X-Gly-His sequence segments, however, is cleaved only in weakly acidic solution (pH < 4.0) and more slowly (half-life is 4.2 h at pH 2.0 and 60 degreesC). We explain the sequence-specificity of X-Pro cleavage by NMR spectroscopic analysis of the coordination of the X-Pro-Met segment to the Pd(II) ion. We give indirect evidence for the mechanism of cleavage by analyzing the conformation of the scissile X-Pro peptide bond, and by comparing the rate constants for the cleavage of the tertiary X-Pro peptide bond, the tertiary X-Sar pepticle bond (Sar is N-methyl glycine), and the typical secondary X-Gly pepticle bond in a set of analogous oligopeptides. Methionine and histidine side chains provide the recognition by selectively binding (anchoring) the Pd(II) ion. The proline residue provides the enhanced activity because its tertiary X-Pro pepticle bond favors the cleavage-enhancing binding of the Pd(II) ion to the pepticle oxygen atom and prevents the cleavage-inhibiting binding of the Pd(II) ion upstream of the anchoring (histidine or methionine) residue. Cleavage can be switched from the residue-selective to the sequence-specific mode by simply adjusting the pH of the aqueous solution. In acidic solutions, any X-Y bond in X-Y-Met and X-Y-His segments is cleaved because the cleavage is directed by anchoring methionine and histidine residues. In mildly acidic and neutral solutions, only the X-Pro bond in X-Pro-Met and X-Pro-His sequences is cleaved because of an interplay between the anchoring residue and the proline residue preceding it. Because Pro-Met and Pro-His sequences are rare in proteins, this sequence-specific cleavage is potentially useful for the removal of the fusion tags from the bioengineered fusion proteins.