We recently reported the isolation and sequencing of sortilin, a new putative sorting receptor that binds receptor-associated protein (RAP). The luminal N-terminus of sortilin comprises a consensus sequence for cleavage by furin, R41WRR44, which precedes a truncation originally found in sortilin isolated from human brain. We now show that the truncation results from cellular processing. Sortilin is synthesized as a proform which, in late Golgi compartments, is converted to the mature receptor by furin-mediated cleavage of a 44 residue N-terminal propeptide. We further demonstrate that the propeptide exhibits pH-dependent high affinity binding to fully processed sortilin, that the binding is competed for by RAP and the newly discovered sortilin ligand neurotensin, and that prevention of propeptide cleavage essentially prevents binding of RAP and neurotensin. The findings evidence that the propeptide sterically hinders ligands from gaining access to overlapping binding sites in prosortilin, and that cleavage and release of the propeptide preconditions sortilin for full functional activity. Although proteolytic processing is involved in the maturation of several receptors, the described exposure of previously concealed ligand-binding sites after furin-mediated cleavage of propeptide represents a novel mechanism in receptor activation.