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Understanding peptide degradation is useful to identify new drug targets.Rational drug design can be based on prior knowledge of an underlying mechanism.DPP-4 inhibitors were developed based on knowledge of incretin hormone biology.Clinical effects of DPP-4 inhibitors may involve additional physiological substrates.Dipeptidyl peptidase-4 (DPP-4) inhibitors are now a widely used, safe and efficacious class of antidiabetic drugs, which were developed prospectively using a rational drug design approach based on a thorough understanding of the endocrinology and degradation of glucagon-like peptide-1 (GLP-1). GLP-1 is an intestinal hormone with potent insulinotropic and glucagonostatic effects and can normalise blood glucose levels in patients with type 2 diabetes, but the native peptide is not therapeutically useful because of its inherent metabolic instability. Using the GLP-1/DPP-4 system and type 2 diabetes as an example, this review summarises how knowledge of a peptide's biological effects coupled with an understanding of the pathways involved in its metabolic clearance can be exploited in a rational, step-by-step manner to develop a therapeutic agent, which is effective and well tolerated, and any side effects are minor and largely predictable. Other peptides with metabolic effects which can also be degraded by DPP-4 will be reviewed, and their potential role as additional mediators of the effects of DPP-4 inhibitors will be assessed.