The sequential activities of four members of the trypsin family of extracellular serine proteases are required for the production of the ventrally localized ligand that organizes the dorsal-ventral pattern of the Drosophila embryo. The last protease in this sequence is encoded by easter, which is a candidate to activate proteolytically the ligand encoded by spätzle. Here, we demonstrate biochemically that the zymogen form of Easter is processed in vivo by a proteolytic cleavage event that requires the three upstream proteases. Processed Easter is present in extremely low amounts in the early embryo because it is rapidly converted into a high molecular mass complex, which may contain a protease inhibitor. Easter zymogen activation is also controlled by a negative feedback loop from Dorsal, the transcription factor at the end of the signaling pathway. Each of these regulated biochemical processes is likely to be important in generating the ventral-to-dorsal gradient of Dorsal protein that organizes cell fates in the early embryo.