An Escherichia coli protease designated Tsp (tail-specific protease) has been purified, and its gene has been cloned and sequenced. Tsp specifically degrades a variant of the N-terminal domain of lambda repressor in which the five C-terminal residues, which are polar in wild type, have been replaced by nonpolar residues. This substrate specificity in vitro parallels the previously reported selective degradation in vivo of N-terminal-domain variants with nonpolar C-terminal residues. The gene sequence and N-terminal protein sequence of Tsp predict a protein of 660 amino acids. The deduced protein sequence of Tsp shows no significant homology to known protease sequences but does show sequence similarity to the human and bovine interphotoreceptor retinoid-binding proteins, which bind hydrophobic ligands.