Generation of the amyloid peptide through proteolytic processing of the amyloid precursor protein by beta- and gamma-secretases is central to the etiology of Alzheimer's disease. The highly elusive beta-secretase was recently identified as a transmembrane aspartic proteinase, Asp2 (BACE). The Asp2 homolog Asp1 (BACE2/DRAP) has also been reported to exhibit beta-secretase cleavage of amyloid precursor protein. Most aspartic proteinases are generated as inactive proenzymes, requiring removal of the prodomain to generate active proteinase. Here we show that prodomain processing of Asp1 occurs between Leu(62) and Ala(63) and is autocatalytic. Asp1 cleaved a maltose-binding protein-Asp1 prodomain fusion protein and a synthetic peptide at this site. Mutation of one of the conserved catalytic aspartic acid residues in the active site of Asp1 to asparagine (D110N) abolished this cleavage. Mutation of P(1)' and P(2)' residues in the substrate to phenylalanine reduced cleavage at this site. Asp1 expressed in cells was the mature form, and prodomain processing occurred intramolecularly within the endoplasmic reticulum/early Golgi. Interestingly, a proportion of mature Asp1 was expressed on the cell surface. When full-length Asp1(D110N) was expressed in COS-7 cells, it was not processed, suggesting that no other proteinase can activate Asp1 in these cells.