During gastrulation, a cascade of inductive tissue interactions converts pre-existing polarity in the mammalian embryo into antero-posterior pattern. This process is triggered by Nodal, a protein related to transforming growth factor-beta (TFG-beta) that is expressed in the epiblast and visceral endoderm, and its co-receptor Cripto, which is induced downstream of Nodal. Here we show that the proprotein convertases Spc1 and Spc4 (also known as Furin and Pace4, respectively) are expressed in adjacent extraembryonic ectoderm. They stimulate Nodal maturation after its secretion and are required in vivo for Nodal signalling. Embryo explants deprived of extraembryonic ectoderm phenocopy Spc1(-/-); Spc4(-/-) double mutants in that endogenous Nodal fails to induce Cripto. But recombinant mature Nodal, unlike uncleaved precursor, can efficiently rescue Cripto expression. Cripto is also expressed in explants treated with bone morphogenetic protein 4 (BMP4). This indicates that Nodal may induce Cripto through both a signalling pathway in the embryo and induction of Bmp4 in the extraembryonic ectoderm. A lack of Spc1 and Spc4 affects both pathways because these proteases also stimulate induction of Bmp4.