Fetal growth restriction (intrauterine growth restriction, IUGR) is a leading cause of perinatal mortality. However, the causes of aberrant development of the placenta and, thus, of the fetus, are not currently known. Insulin-like growth factor II (IGF-II) has been shown to be an important regulator of fetoplacental growth. This growth factor must undergo posttranslational processing, and, thus, we hypothesized that aberrant processing of pro-IGF-II to IGF-II may be a cause of IUGR. Here, we have found that the proprotein convertase PC4 is expressed in the human placenta and that it cleaves pro-IGF-II to generate the intermediate processed form, IGF-II (1-102) and, subsequently, mature IGF-II (1-67), which are accounted for by the removal of terminal basic residues by carboxypeptidases. This processing confers the ability of IGF-II to activate invasive trophoblast cells through AKT phosphorylation, whereas inhibition of PC4 by a PC4-specific inhibitor blocks pro-IGF-II processing and reduces trophoblast cell migration, which can be partly restored by addition of mature IGF-II. Consistent with the hypothesis that IGF-II processing is implicated in IUGR, sera of patients carrying IUGR fetuses displayed elevated levels of pro-IGF-II. Thus, abnormal processing of IGF-II by PC4 may represent a previously uncharacterized mechanism involved in the pathophysiology of fetoplacental growth restriction, and elevated pro-IGF-II may be a useful clinical marker for risk of IUGR.