Proteins of the YPT1/SEC4/rab family are well documented to be involved in the regulation of membrane transport. We have previously reported that rab5 regulates endosome-endosome recognition and/or fusion in vitro. Here, we show that this process depends on the rab5 N-terminal domain. Treatment of early endosomal membranes at a low trypsin concentration essentially abolished fusion and cleaved rab5 to a 1 kDa smaller polypeptide. Two-dimensional gel analysis suggested that rab5 is one of the few, if not the only, polypeptides cleaved by trypsin under these conditions. Whereas endosome fusion could be stimulated by cytosol prepared from cells overexpressing rab5 (and thus containing high amounts of the protein), this stimulation was abolished by trypsin-treatment of the cytosol. Trypsin-treated cytosol prepared from mock-transfected cells, which contains very low amounts of rab5, showed no inhibitory activity indicating that rab5 is the target of trypsin in these experiments. Purified rab5 prepared after expression in Escherichia coli was treated with trypsin, which cleaved the protein at the N-terminus. A synthetic peptide of rab5 N-terminal domain inhibited endosome fusion in our cell-free assay. A version of the same peptide truncated at the N-terminus or a peptide of rab3 N-terminal domain were without effects. Altogether, these observations suggest that the N-terminal domain of rab5 is involved in the process of early endosome recognition and/or fusion, presumably because it interacts with another component of the transport machinery.