PLEXIN genes encode receptors for secreted and membrane-bound semaphorins. It was proposed that the extracellular domain of plexins acts as an inhibitory moiety, preventing receptor activation. Here we show that plexin-B1 and plexin-B2 undergo proteolytic processing in their extracellular portion, thereby converting single-chain precursors into non-disulfide-linked, heterodimeric receptors. We demonstrate that plexin processing is mediated by subtilisin-like proprotein convertases, by inhibition with alpha1-antitrypsin Portland, and by mutagenesis of the substrate-cleavage sites. We provide evidence indicating that proprotein convertases cleave plexins in a post-Golgi compartment and, likely, at the cell surface. In addition, we find that both cell surface targeting and proteolytic processing of plexin-B1 depend on protein-protein interaction motifs in the cytoplasmic domain of the receptor. We then show that proteolytic conversion of plexin-B1 into a heterodimeric receptor greatly increases the binding and the functional response to its specific ligand semaphorin 4D/CD100. Thus, we conclude that cleavage by proprotein convertases is a novel regulatory step for semaphorin receptors localized at the cell surface.