Saposin C is a biological activator of acid beta-glucosidase (GCase), the lysosomal hydrolase with activity towards glucosylceramide (GC). In addition, saposin C possesses a functional domain that determines the in vitro and ex vivo neuritogenic effects of prosaposin, the precursor of saposins A, B, C, and D. The domains for enzymatic activation and neuritogenic function segregate in vitro, respectively, to the carboxyl- and amino-terminal halves of human and mouse saposin C. A chimeric mouse saposin C(1-8)B(8-28)C(30-80) was created to obliterate the neuritogenic region by substituting amino acids 9-29 of saposin C with amino acids 8-28 of saposin B. This saposin showed normal in vitro enzymatic activation effects toward GCase, but no neuritogenic activity. An altered prosaposin was made to contain the chimeric saposin C region. Expression of this altered or wild-type prosaposin was driven by the PGK-1 promoter as a transgene in prosaposin knock-out mice. In cultured fibroblasts from such mice, expressed saposins localized to the lysosomal compartments. Metabolic lipid labeling using L-[3-(14)C]serine showed retention or clearance of GC in prosaposin deficient or transgene reconstituted cells, respectively. In addition, sulfatide catabolism, that requires saposin B and arylsulfatase, was also normalized in prosaposin KO cells reconstituted with the transgenes. These data show that the transgenic prosaposins were expressed and processed to functional saposins in fibroblasts. These results also show that the enzymatic activation domain is located at carboxyl-terminal half of saposin C and functions only in the context of the general saposin structure.