The classical view postulates that neuropeptide precursors in neurons are processed into mature neuropeptides in the somatic trans-Golgi network (TGN) and in secretory vesicles during axonal transport. Here we show that prodynorphin (PDYN), precursor to dynorphin opioid peptides, is predominantly located in axon terminals and dendrites in hippocampal and striatal neurons. The molar content of unprocessed PDYN was much greater than that of dynorphin peptides in axon terminals of PDYN-containing neurons projecting to the CA3 region of the hippocampus and in the striatal projections to the ventral tegmental area. Electron microscopy showed coexistence of PDYN and dynorphins in the same axon terminals with occasional codistribution in individual dense core vesicles. Thus, the precursor protein is apparently stored at presynaptic sites. In comparison with the hippocampus and striatum, PDYN and dynorphins were more equally distributed between neuronal somata and processes in the amygdala and cerebral cortex, suggesting regional differences in the regulation of trafficking and processing of the precursor protein. Potassium-induced depolarization activated PDYN processing and secretion of opioid peptides in neuronal cultures and in a model cell line. Regulation of PDYN storage and processing at synapses by neuronal activity or extracellular stimuli may provide a local mechanism for regulation of synaptic transmission.