The preceding paper (Gross, M., Starn, T. K., Rundquist, C., Crow, P., White, J., Olin, A., and Wagner, T. (1992) J. Biol. Chem. 267, 2073-2079) reported the purification and partial characterization of rabbit reticulocyte peptidyl-tRNA hydrolase. In this article we demonstrate that, unlike bacterial and yeast peptidyl-tRNA hydrolase which act by deacylation, the reticulocyte enzyme hydrolyzes N-acylaminoacyl-tRNA to N-acylaminoacyl-AMP. Reticulocyte lysate has a separate enzyme, that we have isolated and termed aminoacyl-AMP deacylase, which hydrolyzes N-acylaminoacyl-AMP and aminoacyl-AMP, recycling the amino acid and nucleotide components. The action of this enzyme is relatively specific for the N-acylaminoacyl-AMP generated by peptidyl-tRNA hydrolase, since it is much less active with N-acylaminoacyl-adenosine and inactive with N-acylaminoacyl-ACCAC, N-acylaminoacyl-tRNA, or aminoacyl-tRNA. The tRNA product of peptidyl-tRNA hydrolase action is tRNA missing only its 3'-AMP terminus (tRNA(c-c)), since reaminoacylation requires tRNA nucleotidyltransferase but not CTP. The 3' exonucleolytic action of reticulocyte peptidyl-tRNA hydrolase is specific to susceptible tRNA substrates, since it does not hydrolyze CACCA, CACCA-N-acylamino acid, polyuridylic acid, or the 3' polyadenylate tail of globin mRNA, and, since its ability to hydrolyze Escherichia coli f[H-3]Met-tRNA(f)Met is not reduced by excess 5 S or 28 S ribosomal RNA and is reduced only slightly by excess tRNA(c-c). Reticulocyte peptidyl-tRNA hydrolase also hydrolyzes the 3'-AMP terminus of deacylated tRNA. This property may explain why the 3'-terminal AMP of tRNA undergoes turnover in reticulocytes and reticulocyte lysate, since we find that such turnover in gel-filtered reticulocyte lysate is increased under conditions where aminoacylation is reduced.