Human stromelysin-3, a new member of the matrix metalloproteinase family, is expressed in tissues undergoing the active remodelling associated with embryonic development, wound healing and tumour invasion. But like all other members of the matrix metalloproteinase gene family, stromelysin-3 is synthesized as an inactive precursor that must be processed to its mature form in order to express enzymic activity. Here we identify stromelysin-3 as the first matrix metalloproteinase to be discovered that can be processed directly to its enzymically active form by an obligate intracellular proteolytic event that occurs within the constitutive secretory pathway. Intracellular activation is regulated by an unusual 10-amino-acid insert sandwiched between the pro- and catalytic-domains of stromelysin-3, which is encrypted with an Arg-X-Arg-X-Lys-Arg recognition motif for the Golgi-associated proteinase, furin, a mammalian homologue of the yeast Kex2 pheromone convertase. A furin-stromelysin-3 processing axis not only differentiates the regulation of this enzyme from all previously characterized matrix metalloproteinases, but also identifies pro-protein convertases as potential targets for therapeutic intervention in matrix-destructive disease states.