The dipeptide N-acetylaspartyl-glutamate (NAAG) is an abundant neuropeptide in the mammalian brain. Despite this fact, its physiological role is poorly understood. NAAG is synthesized by a NAAG synthetase catalyzing the ATP-dependent condensation of N-acetylaspartate and glutamate. In vitro NAAG synthetase activity has not been described, and the enzyme has not been purified. Using a bioinformatics approach we identified a putative dipeptide synthetase specifically expressed in the nervous system. Expression of the gene, which we named NAAGS (for NAAG synthetase) was sufficient to induce NAAG synthesis in primary astrocytes or CHO-K1 and HEK-293T cells when they coexpressed the NAA transporter NaDC3. Furthermore, coexpression of NAAGS and the recently identified N-acetylaspartate (NAA) synthase, Nat8l, in CHO-K1 or HEK-293T cells was sufficient to enable these cells to synthesize NAAG. Identity of the reaction product of NAAGS was confirmed by HPLC and electrospray ionization tandem mass spectrometry (ESI-MS). High expression levels of NAAGS were restricted to the brain, spinal cord, and testis. Taken together our results strongly suggest that the identified gene encodes a NAAG synthetase. Its identification will enable further studies to examine the role of this abundant neuropeptide in the vertebrate nervous system.