TLR3 belongs to the family of intracellular TLRs that recognize nucleic acids. Endolysosomal localization and cleavage of intracellular TLRs play pivotal roles in signaling and represent fail-safe mechanisms to prevent self-nucleic acid recognition. Indeed, cleavage by cathepsins is required for native TLR3 to signal in response to dsRNA. Using novel Abs generated against TLR3, we show that the conserved loop exposed in LRR12 is the single cleavage site that lies between the two dsRNA binding sites required for TLR3 dimerization and signaling. Accordingly, we found that the cleavage does not dissociate the C- and N-terminal fragments, but it generates a very stable "cleaved/associated" TLR3 present in endolysosomes that recognizes dsRNA and signals. Moreover, comparison of wild-type, noncleavable, and C-terminal-only mutants of TLR3 demonstrates that efficient signaling requires cleavage of the LRR12 loop but not dissociation of the fragments. Thus, the proteolytic cleavage of TLR3 appears to fulfill function(s) other than separating the two fragments to generate a functional receptor.