Autotaxin, also known as ENPP2, was originally isolated from the culture medium of melanoma cells as a cell-motility promoting protein. It regulates cell growth, motility, and angiogenesis through the production of lysophosphatidic acid and sphingosine 1-phosphate. Because autotaxin shows overall structural similarity to the well-characterized PC-1, it has been assumed to be a type II transmembrane protein that is expressed on the cell surface and is released into the extracellular space after proteolytic cleavage. We found, however, that while autotaxin was efficiently secreted into the extracellular space both in vitro and in vivo, it was expressed neither on the surfaces of autotaxin-transfected cells nor on those of the autotaxin-expressing choroid plexus epithelium cells. N-terminal sequencing of the secreted autotaxin revealed that it was cleaved at two N-terminal sites that match the consensus sequences for cleavage by a signal peptidase and furin. In addition, when translated in vitro, autotaxin was co-translationally translocated into microsome membranes, and its N-terminal 3-kDa fragment corresponding to a signal sequence was cleaved. These data demonstrate that the N-terminal hydrophobic sequence of autotaxin functions as a signal peptide, not as a transmembrane segment, and thus autotaxin is synthesized as a secreted protein.