The fusion protein PML-RARalpha, generated by the t(15;17)(q22;q11.2) translocation associated with acute promyelocytic leukemia (APL), initiates APL when expressed in the early myeloid compartment of transgenic mice. PML-RARalpha is cleaved in several positions by a neutral serine protease in a human myeloid cell line; purification revealed that the protease is neutrophil elastase (NE). Immunofluorescence localization studies suggested that the cleavage of PML-RARalpha must occur within the cell, and perhaps, within the nucleus. The functional importance of NE for APL development was assessed in NE deficient mice. Greater than 90% of bone marrow PML-RARalpha cleaving activity was lost in the absence of NE, and NE (but not Cathepsin G) deficient animals were protected from APL development. Primary mouse and human APL cells also contain NE-dependent PML-RARalpha cleaving activity. Since NE is maximally produced in promyelocytes, this protease may play a role in APL pathogenesis by facilitating the leukemogenic potential of PML-RARalpha.