GDF-8 is a negative regulator of skeletal muscle mass. The mechanisms which regulate the biological activity of GDF-8 have not yet been elucidated. Analogous to the TGF-beta system, GDF-8 propeptide binds to and inhibits the activity of GDF-8. In these studies, we define the critical domain of the GDF-8 propeptide necessary for inhibitory activity. Two molecules of GDF-8 propeptide monomer inhibit the biological activity of one molecule of GDF-8 homodimer. Although the propeptide contains N-linked glycosylation when synthesized in mammalian cells, this glycosylation is not necessary for the inhibition of GDF-8. Taking advantage of the bacterial expression system, we express and purify GDF-8 propeptide which retains full inhibitory activity. To define the functional regions of the propeptide, we express a series of truncated GST-propeptide fusion proteins and examined their inhibitory activity. We observe that fusion proteins containing the C-terminal region (amino acid residues 99-266) are very stable, but do not exhibit inhibitory activity; while fusion proteins containing the N-terminal region (amino acid residues 42-115) are labile but contain essential inhibitory activity. The data suggest that the C-terminal region may play a role in the stability of the GDF-8 propeptide and that the inhibitory domain is located in the region between amino acids 42 and 115.