Extracellular human immunodeficiency virus-1 (HIV-1) Tat protein and Tat-derived peptides are biologically active but mechanisms of Tat processing are not known. Within the highly conserved basic region of HIV-1 Tat protein (amino acids, a.a. 48-56), we identified two putative furin cleavage sites and showed that Tat protein was cleaved in vitro at the second site, RQRR\ (a.a. 53-56\). This in vitro cleavage was blocked by a monoclonal antibody that binds near the cleavage site or by the furin inhibitor alpha-1 PDX. Monocytoid cells rich in furin also degraded Tat and this process was slowed by the furin inhibitor or the specific monoclonal antibody. Furin processing did not affect the rates for Tat uptake and nuclear accumulation in HeLa or Jurkat cells, but the transactivation activity was greatly reduced. Furin processing is a likely mechanism for inactivating extracellular HIV-1 Tat protein.