The Drosophila Spätzle protein, involved in the embryonic development of the dorsal-ventral axis and in the adult immune response, is expressed as a proprotein and is activated by the serine proteinases Easter or Spätzle-processing enzyme. Proteolytic cleavage generates a 106-amino acid COOH-terminal fragment, C106, homologous to the mature form of nerve growth factor NGF, a cystine knot protein. Through alternative splicing, the Spätzle gene encodes for several isoforms that (with one exception, the "propeptide isoform") share C106 but differ in the prosequence. Three isoforms have been expressed recombinantly in Escherichia coli strains. The propeptide isoform could be expressed in soluble form and is unstructured according to CD and NMR measurements. Dimeric full-length Spätzle isoforms have been refolded from insoluble inclusion bodies and are able to rescue Spätzle-deficient embryos. Although the two full-length isoforms exhibit similar far-UV CD spectra, large differences in tryptophan fluorescence quenching by the respective pro-parts are observed. Both full-length isoforms exhibited highly cooperative folding transitions. Proteolytic digestion using trypsin resulted in C106, whose unfolding exhibits lower thermodynamic stability and cooperativity compared with the full-length proteins. The structure of C106 reveals a T-shaped dimer with significant differences to NGF and a deep internal cavity. Substantial beta-sheet formation is observed between the two monomers, whereas a long loop containing the single tryptophan residue is disordered in the crystals. Our results suggest that the propeptides stabilize the tertiary structure of the "mature" Spätzle cystine knot.