The proteasome is a hollow cylindrical protease that contains active sites concealed within its central cavity. Proteasomes usually completely degrade substrates into small peptides, but in a few cases, degradation can yield biologically active protein fragments. Examples of this are the transcription factors NF-kappa B, Spt23p and Mga2p, which are generated from precursors by proteasomal processing. How distinct protein domains are spared from degradation remains a matter of debate. Here, we discuss several models and suggest a novel mechanism for proteasomal processing.