A free NH2-terminal group has been previously shown to be an obligatory signal for recognition and subsequent degradation of proteins in a partially fractionated and reconstituted ubiquitin proteolytic system. Naturally occurring proteins with acetylated NH2-termini-most cellular proteins fall in this category-were not degraded by this system. Other studies have suggested that the identity of the NH2-terminal residue is important in determining the metabolic stability of a protein in vivo (N-end rule). Whole reticulocyte lysate and antibodies directed against the ubiquitin-activating enzyme (E1) have now been used to show that such acetylated proteins are degraded in a ubiquitin-dependent mode. Although fractionation of lysate does not affect its proteolytic activity toward substrates with free NH2-termini, it completely abolishes the activity toward the blocked substrates, indicating that an important component of the system was either removed or inactivated during fractionation. An NH2-terminal "unblocking" activity that removes the blocking group, thus exposing a free NH2-terminus for recognition according to the N-end rule, does not seem to participate in this pathway. Incubation of whole lysate with labeled histone H2A results in the formation of multiple ubiquitin conjugates. In contrast, the fractionated system is devoid of any significant conjugating activity. These results suggest that a novel conjugating enzyme (possibly a ubiquitin-protein ligase) may be responsible for the degradation of these acetylated proteins by recognizing structural features of the substrate that are downstream and distinct from the NH2-terminal residue.