Peptide epitopes presented through class I major histocompatability complex (MHC class I) on the cell surface, are generated by proteolytic processing of protein-antigens in the cytoplasm. The length and amino acid sequence determine whether a given peptide can fit into the peptide binding groove of class I heavy chain molecules and subsequently be presented to the immune system. The mode of action of the processing pathway is therefore of great interest. To study the processing mechanism of MHC class I-restricted intracellular antigens, we reconstituted the proteolytic processing of a model antigen in a cell-free system. Incubation of oxidized and urea-treated OVA in lymphocyte lysate resulted in partial degradation of the antigen. Degradation of the antigen depended on the presence of ATP. Addition of methylated ubiquitin abolished the reaction which was then restored by addition of an excess of native ubiquitin, indicating that the breakdown of the antigen in lymphocyte lysate is mediated by the ubiquitin proteolytic system. Upon incubation of modified OVA in lymphocyte lysate, a specific antigenic peptide was generated. The peptide was recognized by cytotoxic T lymphocytes directed against OVA-derived, H-2Kb-restricted peptide (SIINFEKL), and by a monoclonal antibody that recognizes cell-bound Kb- SIINFEKL complexes. Formation of the peptide epitope depended on the presence of ATP and ubiquitin. These results indicate that proteolytic processing of modified OVA is carried out by the ubiquitin-mediated degradation system. The experimental system described provides a tool to analyze the molecular mechanisms underlying the generation of specific, MHC class I-restricted peptide epitopes.