The PHEX gene (phosphate-regulating gene with homologies to endopeptidases on the X chromosome) encodes a protein (PHEX) with structural homologies to members of the M13 family of zinc metallo-endopeptidases. Mutations in the PHEX gene are responsible for X-linked hypophosphataemia in humans. However, the mechanism by which loss of PHEX function results in the disease phenotype, and the endogenous PHEX substrate(s) remain unknown. In order to study PHEX substrate specificity, combinatorial fluorescent-quenched peptide libraries containing o-aminobenzoic acid (Abz) and 2,4-dinitrophenyl (Dnp) as the donor–acceptor pair were synthesized and tested as PHEX substrates. PHEX showed a strict requirement for acidic amino acid residues (aspartate or glutamate) in S₁´ subsite, with a strong preference for aspartate. Subsites S₂´, S₁ and S₂ exhibited less defined specificity requirements, but the presence of leucine, proline or glycine in P₂´, or valine, isoleucine or histidine in P₁ precluded hydrolysis of the substrate by the enzyme. The peptide Abz-GFSDYK(Dnp)-OH, which contains the most favourable residues in the P₂ to P₂´ positions, was hydrolysed by PHEX at the N-terminus of aspartate with a k_cat/K_m of 167 mM⁻¹·s⁻¹. In addition, using quenched fluorescence peptides derived from fibroblast growth factor-23 and matrix extracellular phosphoglycoprotein sequences flanked by Abz and N-(2,4-dinitrophenyl)ethylenediamine, we showed that these physiologically relevant proteins are potential PHEX substrates. Finally, our results clearly indicate that PHEX does not have neprilysin-like substrate specificity.