Hyaluronate degradation was examined in cultures of vascular wall cells (bovine aortic endothelial cells, rat aortic smooth muscle cells) and in nonvascular cells (chick embryo fibroblasts). The three cell types examined all produced hyaluronidase activity in culture which had a strict acidic pH requirement for activity. This suggested that the enzyme was active only within an acidic intracellular compartment and therefore that hyaluronate degradation occurred at an intracellular site. This was supported by the observation that the presence of hyaluronidase activity alone was not sufficient to ensure degradation of extracellular hyaluronate. Rather, the key limiting factor in this process appeared to be hyaluronate internalization, and this was found to be hyaluronate size-dependent and to a degree, cell-specific. The relationship of these results to morphogenesis and tissue remodeling is discussed.