Carboxypeptidase Y is a vacuolar enzyme from Saccharomyces cerevisiae. It enters the vacuole as a zymogen, procarboxypeptidase Y, which is immediately processed in a reaction involving two endoproteases, proteinase A and proteinase B. We have investigated the in vitro activation of purified procarboxypeptidase Y by purified proteinase A. This has identified two different processing intermediates; one active and one inactive. The intermediates define a 33 amino acid segment of the 91 amino acid propeptide as sufficient for maintaining the enzyme in an inactive state. The inactive intermediate was isolated from a processing reaction at neutral pH. In order to investigate the influence of vacuolar pH on processing in vivo, the autoactivation of proteinase A and its processing of procarboxypeptidase Y were studied in a vma2 prb1 mutant, which is deficient in vacuolar acidification and proteinase B activity. Efficient processing of procarboxypeptidase Y in the absence of proteinase B is dependent on acidic vacuolar pH, and the processing at neutral pH is slow and takes place in two steps similar to those identified in vitro.