Bone morphogenetic protein-1 (BMP-1) plays key roles in regulating the deposition of vertebrate extracellular matrix; it is the procollagen C-proteinase that processes the major fibrillar collagen types I-III, and it may process prolysyl oxidase to the mature enzyme necessary to the formation of covalent cross-links in collagen and elastic fibers. Type V collagen is a fibrillar collagen of low abundance that is incorporated into and helps regulate the shape and diameter of type I collagen fibrils. Here we show that, in contrast to its action on procollagens I-III, BMP-1 does not cleave the C-propeptide of pro-alpha1(V) homotrimers. Instead, the single BMP-1-specific cleavage site within pro-alpha1(V) chains, lies within the large globular N-propeptide. This cleavage site is immediately upstream of a glutamine, thus redefining the specificity of cleavage for BMP-1-like enzymes. It also produces an NH2 terminus that corresponds to an equivalent NH2 terminus on the processed matrix form of the similar alpha1(XI) chain, thus suggesting physiological significance. Cleavage of the C-propeptide occurs efficiently in recombinant pro-alpha1(V) homotrimers produced in 293-EBNA human embryonic kidney cells, and this cleavage is shown to occur immediately downstream of the sequence RTRR. This is similar to sites cleaved by subtilisin-like proprotein/prohormone convertases and is shown to be specifically cleaved by the recombinant subtilisin-like proprotein/prohormone convertase furin.