Insulin is produced from an inactive precursor, proinsulin, through initial endoproteolytic cleavage at sites marked by pairs of basic amino-acid residues. We report here that lysates of insulin secretory granules contain two distinct Ca-dependent acidic endoproteases; one (type I) cleaving exclusively on the C-terminal side of Arg 31.Arg 32 (B-chain/C-peptide junction), the other (type II) preferentially on the C-terminal side of Lys 64.Arg 65 of proinsulin (C-peptide/A-chain junction). The Ca and pH requirements of these proteinases suggested that the type-II proteinase would be active in the Golgi apparatus and the secretory granule, whereas type-I activity would be compatible only with the intragranular environment. Kinetic analyses of (pro)insulin conversion intermediates in [35S]methionine-pulsed rat islets support this supposition. Our results suggest a simple mechanism whereby different dibasic sites can be cleaved in different cellular compartments. In conjunction with the regulation of the ionic composition of such compartments and the operation of post-Golgi segregation, our results also suggest how proteolytic conversion of diverse proproteins destined for different cellular sites can occur differentially and in a regulated manner.