Biochemical and enzymatic characterization of the novel human subtilase hSKI-1 was carried out in various cell lines. Within the endoplasmic reticulum of LoVo cells, proSKI-1 is converted to SKI-1 by processing of its prosegment into 26-, 24-, 14-, 10-, and 8-kDa products, some of which remain tightly associated with the enzyme. N-terminal sequencing and mass spectrometric analysis were used to map the cleavage sites of the most abundant fragments, which were confirmed by synthetic peptide processing. To characterize its in vitro enzymatic properties, we generated a secreted form of SKI-1. Our data demonstrate that SKI-1 is a Ca(2+)-dependent proteinase exhibiting optimal cleavage at pH 6.5. We present evidence that SKI-1 processes peptides mimicking the cleavage sites of the SKI-1 prosegment, pro-brain-derived neurotrophic factor, and the sterol regulatory element-binding protein SREBP-2. Among the candidate peptides encompassing sections of the SKI-1 prosegment, the RSLK(137)- and RRLL(186)-containing peptides were best cleaved by this enzyme. Mutagenesis of the latter peptide allowed us to develop an efficiently processed SKI-1 substrate and to assess the importance of several P and P' residues. Finally, we demonstrate that, in vitro, recombinant prosegments of SKI-1 inhibit its activity with apparent inhibitor constants of 100-200 nM.