Cerebral small-vessel disease is a common disorder in elderly populations; however, its molecular basis is not well understood. We recently demonstrated that mutations in the high-temperature requirement A (HTRA) serine peptidase 1 (HTRA1) gene cause a hereditary cerebral small-vessel disease, cerebral autosomal recessive arteriopathy with subcortical infarcts and leukoencephalopathy (CARASIL). HTRA1 belongs to the HTRA protein family, whose members have dual activities as chaperones and serine proteases and also repress transforming growth factor-β (TGF-β) family signaling. We demonstrated that CARASIL-associated mutant HTRA1s decrease protease activity and fail to decrease TGF-β family signaling. However, the precise molecular mechanism for decreasing the signaling remains unknown. Here we show that increased expression of ED-A fibronectin is limited to cerebral small arteries and is not observed in coronary, renal arterial or aortic walls in patients with CARASIL. Using a cell-mixing assay, we found that HTRA1 decreases TGF-β1 signaling triggered by proTGF-β1 in the intracellular space. HTRA1 binds and cleaves the pro-domain of proTGF-β1 in the endoplasmic reticulum (ER), and cleaved proTGF-β1 is degraded by ER-associated degradation. Consequently, the amount of mature TGF-β1 is reduced. These results establish a novel mechanism for regulating the amount of TGF-β1, specifically, the intracellular cleavage of proTGF-β1 in the ER.