We describe a permanent line of Chinese hamster ovary cells transfected with a cDNA encoding a truncated form of Site-1 protease (S1P) that is secreted into the culture medium in an enzymatically active form. S1P, a subtilisin-like protease, normally cleaves the luminal loop of sterol regulatory element-binding proteins (SREBPs). This cleavage initiates the two-step proteolytic process by which the NH(2)-terminal domains of SREBPs are released from cell membranes for translocation to the nucleus, where they activate transcription of genes involved in the biosynthesis and uptake of cholesterol and fatty acids. Truncated S1P (amino acids 1-983), produced by the transfected Chinese hamster ovary cells, lacks the COOH-terminal membrane anchor. Like native S1P, this truncated protein undergoes normal autocatalytic processing after residue 137 to release an NH(2)-terminal propeptide, thereby generating an active form, designated S1P-B. Prior to secretion, truncated S1P-B, like native S1P-B, is cleaved further after residue 186 to generate S1P-C, which is the only form that appears in the culture medium. The secreted enzyme, designated S1P(983)-C, cleaves a synthetic peptide that terminates in a 7-amino-4-methyl-coumarin fluorochrome. This peptide, RSLK-MCA, corresponds to the internal propeptide cleavage site that generates S1P-B as described in the accompanying paper (Espenshade, P. J., Cheng, D., Goldstein, J. L., and Brown, M. S. (1999), J. Biol. Chem. 274, 22795-22804). The secreted enzyme does not cleave RSVL-MCA, a peptide corresponding to the physiologic cleavage site in SREBP-2. However, S1P(983)-C does cleave after this leucine when the RSVL sequence is contained within a 16-residue peptide corresponding to the central portion of the SREBP-2 luminal loop. The catalytic activity of S1P(983)-C differs from that of furin/prohormone convertases, two related proteases, in its more alkaline pH optimum (pH 7-8), its relative resistance to calcium chelating agents, and its ability to cleave after lysine or leucine rather than arginine. These data provide direct biochemical evidence that S1P is the protease that cleaves SREBPs and thereby functions to control lipid biosynthesis and uptake in animal cells.