Saccharomyces cerevisiae MATa and MAT alpha cells secrete a-factor and alpha-factor pheromones. These peptides act on cells of the opposite mating type. They induce physiological changes which allow the formation of diploid cells. MATa strains produce an extracellular protease which cleaves, and thus inactivates the MAT alpha cell-specific alpha-factor pheromone. This pepsin-like enzyme is encoded by the BAR1(SST1) gene and is secreted into the periplasmic space of MATa cells. We found that the Bar1p protease is already active in early compartments of the secretory pathway. Our results indicate that Bar1 protease tolerates large N-terminal extensions of its substrate and does not require Golgi-specific modifications such as outer-chain glycosylation for activity.