Peroxisomes are subcellular organelles involved in lipid metabolic processes, including those of very-long-chain fatty acids and branched-chain fatty acids, among others. Peroxisome matrix proteins are synthesized in the cytoplasm. Targeting signals (PTS or peroxisomal targeting signal) at the C-terminus (PTS1) or N-terminus (PTS2) of peroxisomal matrix proteins mediate their import into the organelle. In the case of PTS2-containing proteins, the PTS2 signal is cleaved from the protein when transported into peroxisomes. The functional mechanism of PTS2 processing, however, is poorly understood. Previously we identified Tysnd1 (Trypsin domain containing 1) and biochemically characterized it as a peroxisomal cysteine endopeptidase that directly processes PTS2-containing prethiolase Acaa1 and PTS1-containing Acox1, Hsd17b4, and ScpX. The latter three enzymes are crucial components of the very-long-chain fatty acids β-oxidation pathway. To clarify the in vivo functions and physiological role of Tysnd1, we analyzed the phenotype of Tysnd1(-/-) mice. Male Tysnd1(-/-) mice are infertile, and the epididymal sperms lack the acrosomal cap. These phenotypic features are most likely the result of changes in the molecular species composition of choline and ethanolamine plasmalogens. Tysnd1(-/-) mice also developed liver dysfunctions when the phytanic acid precursor phytol was orally administered. Phyh and Agps are known PTS2-containing proteins, but were identified as novel Tysnd1 substrates. Loss of Tysnd1 interferes with the peroxisomal localization of Acaa1, Phyh, and Agps, which might cause the mild Zellweger syndrome spectrum-resembling phenotypes. Our data established that peroxisomal processing protease Tysnd1 is necessary to mediate the physiological functions of PTS2-containing substrates.