The assembly of eukaryotic 20 S proteasomes involves the formation of half-proteasomes where precursor beta-type subunits gather in position on an alpha-subunit ring, followed by the association of two half-proteasomes and beta-subunit processing. In vertebrates three additional beta-subunits (beta1i/LMP2, beta2i/MECL1, and beta5i/LMP7) can be synthesized and substituted for constitutive homologues (beta1/delta, beta2/Z, and beta5/X) to yield immunoproteasomes, which are important for generating certain antigenic peptides. We have shown previously that when all six beta-subunits are present, cooperative assembly mechanisms limit the diversity of proteasome populations. Specifically, LMP7 is incorporated preferentially over X into preproteasomes containing LMP2 and MECL1. We show here that the LMP7 propeptide is responsible for this preferential incorporation, and it also enables LMP7 to incorporate into proteasomes containing delta and Z. In contrast, the X propeptide restricts incorporation to proteasomes with delta and Z. Furthermore, we demonstrate that the LMP7 propeptide can function in trans when expressed on LMP2, and that its NH(2)-terminal and mid-regions are particularly critical for function. In addition to identifying a novel propeptide function, our results raise the possibility that one consequence of LMP7 incorporation into both immunoproteasomes and delta/Z proteasomes may be to increase the diversity of antigenic peptides that can be generated.