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Endocannabinoids (endogenous ligands of cannabinoid receptors) such as anandamide (N-arachidonoylethanolamine) and 2-arachidonoylglycerol (2-AG) are inactivated upon enzymatic hydrolysis. Recent progress in the enzymological and molecular biological studies on the 'endocannabinoid hydrolases' is reviewed in this article. Anandamide is hydrolyzed to arachidonic acid and ethanolamine by a membrane-bound amidase generally referred to as fatty acid amide hydrolase (FAAH). This enzyme has a broad substrate specificity, hydrolyzing oleamide (an endogenous sleep-inducing factor) and 2-AG as well as anandamide. cDNA cloning revealed that FAAH is composed of 579 amino acids and belongs to the amidase signature family. A serine residue functioning as a catalytic nucleophile and several other catalytically important residues were identified in its primary structure. Furthermore, recent generation and analysis of the FAAH gene-deficient mice demonstrated the central role of this enzyme in the metabolism of anandamide. Alternatively, an amidase, which is distinct from FAAH but also hydrolyzing anandamide and other N-acylethanolamines at acidic pH, was identified in human megakaryoblastic cells and rat organs such as lung and spleen. As for the 2-AG hydrolysis, in addition to the known monoacylglycerol lipase, other esterases and FAAH may be involved.