1. The cartilage-proteoglycan-degrading activity of synovial fluid cells from rheumatoid patients is primarily due to neutral protease activity; hyaluronidase does not contribute significantly. Evidence for these conclusions is adduced from electrophoresis of degradation products, from comparison of the proteoglycan-degrading and protease activities of extracts and from the effects of activators and inhibitors. 2. Most of the neutral protease activity is insoluble in buffer of low ionic strength and may thus be separated from small amounts of other, soluble, proteoglycan-degrading enzymes. This ‘insoluble’ protease dissolves in KCl (1 mol/l) and has appreciable solubility even at physiological ionic strength. 3. The protease has optimum activity between pH 7.5 and pH 10, with little or no activity below pH 6.0. 4. The enzyme hydrolyses a number of substrates including elastin and two synthetic substrates for elastase. Hydrolysis of the latter is inhibited by dilutions of synovial fluids and serum and it thus differs from the elastase-like esterase activity of synovial fluid and serum. 5. The ‘insoluble’ enzyme fraction caused loss of staining and release of hexuronate from slices of bovine articular cartilage at salt concentrations near physiological and these effects were almost completely inhibited by cell-free synovial fluids. 6. The properties of the synovial fluid cell neutral protease are compared with those of the similar enzyme activity found in granulocytes from blood and it is concluded that the synovial fluid enzyme is probably derived from granulocytes.