Cathepsin E (CE) is an endosomal aspartic proteinase of the A1 family that is highly homologous to the lysosomal aspartic proteinase cathepsin D (CD). Newly synthesized CE undergoes several proteolytic processing events to yield mature CE, from which the N-terminal propeptide usually comprising 39 amino acids is removed. To define the role of the propeptide of CE in its biosynthesis and processing, we constructed two fusion proteins using chimeric DNAs encoding the CE propeptide fused to the mature CD tagged with HA at the COOH terminus (termed ED-HA) and encoding the CD propeptide fused to the mature CE (termed DE). Pulse-chase analysis revealed that wild-type CE expressed in human embryonic kidney cells is autoproteolytically processed into mature CE within a 12-h chase, whereas the chimeric DE failed to be converted into mature CE even after a 24-h chase. The DE chimera was nevertheless capable of acid-dependent autoactivation in vitro to yield a catalytically active form, although its specificity constants (kcat/Km) were considerably high but less (35%) than those of the wild-type CE. By contrast, the chimeric ED-HA expressed in HeLa cells underwent neither processing into a catalytically active enzyme nor acid-dependent autoactivation in vitro. The ED-HA protein was less stable than wt-CD-HA, as determined on pulse-chase analysis and on trypsin digestion. These data indicate that the propeptide of CE is essential for the correct folding, maturation, and targeting of this protein to its final destination.