Collagen type XI is a minor constituent of heterotypic collagen fibrils of developing cartilage and plays a regulatory role in fibril diameter. Collagen type XI is a heterotrimer composed of the alpha1, alpha2 and alpha3 chains. The mRNA encoding exons 6a, 6b and 8 of the alpha1 chain are expressed alternatively to generate six possible isoforms. The 6b-containing isoform has the most restricted distribution of all isoforms. It is first localized in the developing long bone, where mineralized tissue initially forms, and is later restricted to regions of cartilage that will be subsequently converted into bone. Bone morphogenetic protein 1 (BMP-1) and related proteins cleave procollagens I-III, V and VII, yielding triple-helical molecules that associate into collagen fibrils. The present study demonstrates that the alpha1 chain of collagen type XI can serve as a substrate for BMP-1. In addition, the efficiency with which BMP-1 processes different isoforms of the alpha1 chain varies. The amino acid sequence adjacent to the processing site influences the rate and extent of processing, as do sequences further away. Smaller fragments identified from cartilage extracts indicated that processing by BMP-1, in combination with other processing enzymes, generates small fragments of p6b-containing isoforms.