A peptide amidase isolated from the flavedo of citrus fruits, preferably oranges, which is capable of catalyzing the selective hydrolytic elimination of the free amino group on the C-terminal end of peptide amides but which does not cleave peptide bonds. The enzyme accepts D-amino acid residues in the C-terminal position, although the hydrolysis rate is much slower than with L-amino acid residues. The enzyme is weakly inhibited by serine protease inhibitors; has an optimal pH of 7.5.+-.1.5, an optimum temperature of 30.degree. C. at pH 7.5 and has an isoelectric point of pH 9.5. The peptide amidase is stable at pH 6.0-9.0. The molecular weight of the purified enzyme is 23,000 +/- 3000 daltons. A peptide amidase according to the present invention is particular useful in the production of peptides by continuous enzymatic reaction of N-protected amino acid or peptide alkyl esters with amides of amino acids. In the continuous reaction, the synthesized peptide amide is hydrolyzed by the peptide amidase and separated by anion exchange from the amide of the amino acid which can be recycled.