Biochemical and enzymatic characterization of the novel proprotein convertase rat PC7 (rPC7) was carried out using vaccinia virus recombinants overexpressed in mammalian BSC40 cells. Pro-PC7 is synthesized as a glycosylated zymogen (101 kDa) and processed into mature rPC7 (89 kDa) in the endoplasmic reticulum. No endogenously produced soluble forms of this membrane-anchored protein were detected. A deletion mutant (65 kDa), truncated well beyond the expected C-terminal boundary of the P-domain, produced soluble rPC7 in the culture medium. Enzymatic activity assays of rPC7 using fluorogenic peptidyl substrates indicated that the pH optimum, Ca2+ dependence, and cleavage specificity of this enzyme are largely similar to those of furin. However, with some substrates, cleavage specificity more closely resembled that of yeast kexin, suggesting differential processing of proprotein substrates by this novel convertase. We examined the rPC7- and human furin-mediated cleavage of synthetic peptides containing the processing sites of three proteins known to colocalize in situ with rPC7. Whereas both enzymes correctly processed the pro-parathyroid hormone tridecapeptide and the pro-PC4 heptadecapeptide, neither enzyme cleaved a pro-epidermal growth factor hexadecapeptide. Thus, this study establishes that rPC7 is an enzymatically functional subtilisin/kexin-like serine proteinase with a cleavage specificity resembling that of hfurin. In addition, we have demonstrated that rPC7 can correctly process peptide precursors that contain the processing sites of at least two potential physiological substrates.