Horseshoe crab factor B is an intracellular serine protease zymogen involved in the bacterial endotoxin-responsive hemolymph coagulation cascade. cDNAs for factor B were isolated utilizing a polymerase chain reaction product using two primers derived from the partial amino acid sequence. The cloned cDNA of 1928 base pairs encoded 400 amino acid residues of factor B precursor. The first 23 amino acid residues constitute a presumed prepropeptide that may be processed by both a signal peptidase and a processing protease, similar to mammalian vitamin K-dependent protease precursors. The mature protein consists of 377 amino acids with a calculated molecular mass of 40,570 Da. The overall structure is highly homologous to that of limulus proclotting enzyme (35.9% identity), the substrate for active factor B in the cascade. Like the proclotting enzyme, mature factor B is composed of an amino-terminal "clip"-like domain and a carboxyl-terminal serine protease domain homologous to that of human plasma prekallikrein (36.5%). Internal sequences encode a unique activation peptide. Surprisingly, the cleavage sites of the zymogen factor B for activation by limulus active factor C were found to be an Arg-Ser and an Ile-Ile bond, the latter of which has not been found in any other protease zymogens. These cleavages result in the release of the activation peptide, which consists of 21 residues with a carboxyl-terminal isoleucine. These results indicate that the intracellular clotting system of the limulus hemocyte, like mammalian plasma clotting cascade, proceeds with the sequential activation of three serine protease zymogens: factor C, factor B, and proclotting enzyme.