Proteolysis of the hyalectans (aggrecan, versican, brevican) in vivo appears to result from the activity of ADAMTS4 (aggrecanase-1, herein referred to as an hyalectanase). To examine the mode of activation of ADAMTS4, a human chondrosarcoma cell line, JJ012, has been stably transfected with the full-length c-DNA for human ADAMTS4. The cells synthesized a high molecular weight form of the enzyme (p100), which in serum-free culture was processed to three truncated forms, p75, p60, and p50. Treatment of the p100 form with recombinant furin indicated that the p75 form is generated by the removal of the prodomain by a furin-like activity. Analysis with domain-specific antisera showed that the p60 and p50 forms are generated by C-terminal truncation of the p75 form. The appearance of the p60 and p50 forms in culture medium was prevented by inclusion of a furin inhibitor, inhibitors of glycosylphosphatidylinositol synthesis, glucosamine, a hydroxamate-based matrix metalloproteinase (MMP) inhibitor, and TIMP-1, but not by AEBSF (4-(2-aminoethyl)benzenesulfonyl fluoride) or E64. Only medium samples containing the p60/p50 forms exhibited aggrecanase activity, and isolation of the p75, p60, and p50 forms by preparative SDS-PAGE showed that only p60 and p50 were active in aggrecanase and versicanase assays. Pig synovium and human cartilages also contained ADAMTS4 in the p75, p60, and p50 forms. We suggest that in vivo production of proteolytically active ADAMTS4 requires not only removal of the prodomain by a furin-like activity but also MMP-mediated removal of a portion of the C-terminal spacer domain.