SPC4 (PACE4), a member of the eukaryotic family of subtilisin-like proprotein convertases, is synthesized as a proenzyme (proSPC4) which undergoes proteolytic removal of N-terminal propeptide during transit through the secretory pathway. As this propeptide processing seems to be a key event in the functional expression of SPC4, we have investigated its mechanism and the intracellular site where it occurs. In transfected fibroblast cells, the 110-kDa proSPC4 undergoes slow cleavage to generate a 103-kDa mature enzyme in the endoplasmic reticulum (ER). Site-directed mutagenesis studies demonstrate that the proteolytic activation of SPC4 occurs mainly through a unimolecular autocatalytic process and propeptide cleavage is a prerequisite for its export from the ER. Sedimentation velocity and chemical cross-linking analysis demonstrate that the precursor protein in the cells exists as both a monomer and a dimer-sized complex whereas mature SPC4 exists only as a monomer. These results suggest that the cleavage of the N-terminal propeptide of SPC4 plays a regulatory role in its activation and secretion through the change in its oligomeric state.