Carboxypeptidase E (CPE, EC 3.4.17.10) is an essential enzyme in the post-translational processing of most neuroactive peptides. We have studied how the expression of CPE in the rat retina is modified in response to the light/dark cycle. Retinal CPE mRNA levels increase immediately after a change in lighting condition. After prolonged exposure to the dark or the light, however, CPE mRNA levels drop to comparable amounts. The increase CPE mRNA is most dramatic during the dark-to-light transition. Interestingly, during the same interval, CPE protein levels transiently decrease. This apparently contradictory change in mRNA and protein levels is attributable to a change in the spatial pattern of CPE expression in the retina in response to light and dark. Both in situ hybridization and indirect immunofluorescence studies indicate that CPE is expressed in photoreceptors in the dark. During light onset, CPE expression is rapidly induced in retinal ganglion cells, whereas expression in photoreceptors is reduced. This pattern is reversed when the animals are exposed to the dark. In contrast, CPE is apparently constitutively expressed in a subpopulation of cells in the inner nuclear layer in both the light and the dark. These changes in CPE expression are similar to light-induced changes in c-fos expression, suggesting that CPE may be a downstream target for Fos activation.