Dipeptidyl peptidase (DPP) IV inhibitors provide a new strategy for the treatment of type 2 diabetes. Human DPP-IV gene was cloned from differentiated Caco-2 cells and expressed in Pichia pastoris. The recombinant enzyme was used in a new system for screening of DPP-IV inhibitors. By high throughput screening, a novel compound (W5188) was identified from 75,000 compounds with an IC50 of 6.5 mu M. This method is highly reproducible and reliable for discovery of DPP-IV inhibitors as shown by Z' value of 0.73 and S/N ratio of 6.89.