Electrospray mass spectroscopy of aqueous solutions containing two different dipeptides, treated with a protease, showed ions corresponding to adducts and new dipeptides, indicating that transpeptidation had occurred. Hydrophobic dipeptides alone mainly gave ions corresponding to oligomers up to the heptamer, indicating that a net condensation reaction had occurred, apparently driven by the insolubility of the oligomers. Nuclear magnetic resonance analysis of 1-C-13-labeled hydrophobic peptides used as markers in plastein-type reactions showed extensive peptide bond formation, indicating that both transpeptidation and condensation had occurred. Extracts of casein hydrolysates, enriched in hydrophobic peptides did not exhibit significant condensation reactions under similar conditions. When hydrophilic di- and tripeptides were used as markers, nuclear magnetic resonance analysis failed to detect transpeptidation reactions catalyzed by endoproteases, even though the dipeptide studies showed that they were possible. Exopeptidases, however, catalyzed transpeptidation of up to 30% of the marker peptide, in both plastein-type reactions and proteolysis of casein, albeit after relatively long reaction times. It is possible that larger, stronger-binding peptides inhibit the transpeptidation of dipeptides by endoproteases but not by exopeptidases. It is likely that transpeptidation is not a significant process under normal industrial proteolysis conditions and causes no ill effects when it does occur, as exopeptidases normally improve protein hydrolysate properties.