Cannabinoids are psychoactive components of marijuana, and bind to specific G protein-coupled receptors in the brain and other mammalian tissues. Anandamide (arachidonoylethanolamide) was discovered as an endogenous agonist for the cannabinoid receptors. Hydrolysis of anandamide to arachidonic acid and ethanolamine results in the loss of its biological activities. The enzyme responsible for this hydrolysis was solubilized, partially purified from the microsomes of porcine brain, and referred to as anandamide amidohydrolase. In addition to the anandamide hydrolysis, the enzyme preparation catalyzed anandamide synthesis by the condensation of arachidonic acid with ethanolamine. Several lines of enzymological evidence suggested that a single enzyme catalyzes both the hydrolysis and synthesis of anandamide. This reversibility was confirmed by the use of a recombinant enzyme of rat liver overexpressed in COS-7 cells. However, in consideration of the high Km value for ethanolamine as a substrate for the anandamide synthesis, the enzyme was presumed to act as a hydrolase rather than a synthase under physiological conditions. The recombinant enzyme acted not only as an amidase hydrolyzing anandamide and other fatty acid amides but also as an esterase hydrolyzing methyl ester of arachidonic acid. 2-Arachidonoylglycerol, which was found recently to be another endogenous ligand, was also efficiently hydrolyzed by the esterase activity of the same enzyme. The anandamide hydrolase and synthase activities were detected in a variety of rat organs, and liver showed by far the highest activities. A high anandamide hydrolase activity was also detected in small intestine but only after the homogenate was precipitated with acetone to remove endogenous lipids inhibiting the enzyme activity. The distribution of mRNA of the enzyme was in agreement with that of the enzyme activity.