The glycoprotein (GP) of lymphocytic choriomeningitis virus (LCMV) serves as virus attachment protein to its receptor on host cells and is a key determinant for cell tropism, pathogenesis, and epidemiology of the virus. The GP of LCMV is posttranslationally cleaved by the subtilase SKI-1/S1P into two subunits, the peripheral GP1, which is implicated in receptor binding, and the transmembrane GP2 that is structurally similar to the fusion active membrane proximal portions of the glycoproteins of other enveloped viruses. The present study shows that cleavage by SKI-1/S1P is not required for cell surface expression of LCMVGP on infected cells but is essential for its incorporation into virions and for the production of infectious virus particles. In absence of SKI-1/S1P cleavage, cell-to-cell propagation of the virus was markedly reduced. Further, proteolytic processing of LCMVGP depends on the presence of a cluster of basic amino acids at the C-terminus of the cytoplasmic domain of GP2, a structural motif that is conserved in Old World arenaviruses. The effect of the truncation of the cytoplasmic tail on cleavage suggests a structural interdependence between the cytoplasmic domain and the ectodomains of LCMVGP.