Collagen VII is the major structural component of the anchoring fibrils at the dermal-epidermal junction in the skin. It is secreted by keratinocytes as a precursor, procollagen VII, and processed into mature collagen during polymerization of the anchoring fibrils. We show that bone morphogenetic protein-1 (BMP-1), which exhibits procollagen C-proteinase activity, cleaves the C-terminal propeptide from human procollagen VII. The cleavage occurs at the BMP-1 consensus cleavage site SYAA/DTAG within the NC-2 domain. Mammalian tolloid-like (mTLL)-1 and -2, two other proteases of the astacin enzyme family, were able to process procollagen VII at the same site in vitro. Immunohistochemical and genetic evidence supported the involvement of these enzymes in cleaving type VII procollagen in vivo. Both BMP-1 and mTLL-1 are expressed in the skin and in cultured cutaneous cells. A naturally occurring deletion in the human COL7A1 gene, 8523del14, which is associated with dystrophic epidermolysis bullosa and eliminates the BMP-1 consensus sequence, abolished processing of procollagen VII, and in mutant skin procollagen VII accumulated at the dermal-epidermal junction. On the other hand, deficiency of BMP-1 in the skin of knockout mouse embryos did not prevent processing of procollagen VII to mature collagen, suggesting that mTLL-1 and/or mTLL-2 can substitute for BMP-1 in the processing of procollagen VII in situ.