Proinsulin conversion in the insulin secretory granule is mediated by two sequence-specific endoproteases related to the Kex2 homologues, PC2 and PC3 (Bennett, D. L., Bailyes, E. M., Nielsen, E., Guest, P. C., Rutherford, N. G., Arden, S. D., and Hutton, J. C. (1992) J. Biol. Chem. 267, 15229-15236; Bailyes, E. M., Bennett, D. L., and Hutton, J. C. (1992) Enzyme, in press). Radiolabeling studies using isolated rat islets showed that PC2 was synthesized initially as a 76-kDa glycoprotein which was converted by limited proteolysis to the mature 64-66-kDa form. Conversion was initiated approximately 1 h after synthesis and proceeded via intermediates of 71, 68, and 66 kDa with a t1/2 of 140 min. Release of only the 66- and 64-66-kDa radiolabeled forms of PC2 was induced by glucose and then only at times more than 2 h following synthesis. Proinsulin conversion, by contrast, was more rapid (delay = 30 min, t1/2 = 60 min), and release commenced as soon as 1 h after synthesis with the secreted material being comprised of the precursor, intermediate, and mature forms of insulin. Ultrastructural analysis of islet beta cells showed that PC2 was concentrated in secretory granules. Subcellular fractionation combined with immunoblot analysis showed that insulinoma secretory granules contained only the mature 64-66-kDa form of PC2, whereas fractions enriched in Golgi and endoplasmic reticulum contained a mixture of the 76- and 66-kDa forms of the enzyme. These results indicate that post-translational proteolysis of PC2 is initiated before sorting into the regulated pathway of secretion and that the relative proportions of proinsulin and PC2 packaged into secretory granules will change with physiological conditions.